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A  CONTRIBUTION  TO 
THE  CRITIQUE  OF 
POLITICAL    ECONOMY 


BY 

KARL  MARX 


Translated   from  the  Second  German  EditioB  by   N.    I.    Stone 


Wt<ban  Appendix  Containing  Marx's  Introduction  to  the  Critique 
Recently  Published  among  His  Posthumous  Papers. 


CHICAGO  ^     yr\ 


CHARLES  H.  KERR  &  COMPANY 


LOAN  STACK 


Copyright,  1904 
By  the  International  Library  Publishing  Co. 


filMrT'l^iDZ^^ 


1^ 


TRANSLATOR'S    PREFACE, 

The  present  translation  has  been  made  from  the  sec- 
ond edition  of  the  "Zur  Kritik  der  Politischen  Oekon- 
omie,"  published  by  Karl  Kautsky  in  1897  with  slight 
changes  from  the  original  edition  of  1859 ;  changes  that 
had  been  indicated  by  Marx  on  the  margins  of  his  own 
copy  of  the  book. 

As  will  be  seen  from  the  author's  preface,  the  work 
was  originally  issued  as  the  first  instalment  of  a  com- 
plete treatise  of  political  economy.  As  he  went  on 
with  his  work,  however,  Marx  modified  his  plans  and 
eight  years ,  after  the  appearance  of  the  "Zur  Kritik" 
lie  published  the  first  volume  of  his  Capital,  whose  scope 
was  intended  to  cover  the  entire  field  of  political 
economy. 

The  plan  to  which  Marx  alludes  in  the  preface  to 
ihe  present  work  was  thus  abandoned  in  its  formal  as- 
pects, but  not  in  substance.  The  subject  matter  treated 
here  Avas  reproduced  or  rather  "summarized,"  as  Marx 
himself  puts  it,  in  Capital.  But  that  was  done  in  so 
far  as  was  necessary  to  secure  continuity  of  treatment. 
On  the  other  hand,  many  important  matters  are  treated 
here  more  thoroughly  than  in  Capital,  especially  the  part 
devoted  to  the  discussion  of  money.  This,  as  well  as 
the  chapters  on  the  history  of  the  theories  of  value  and 


of  money,  which  do  not  appear  in  Capital,  make  "Zur 
Kritik"  a  work  practically  complete  in  itself. 

The  recent  silver  agitation  in  this  country  shows  how 
timely  and  useful  this  work  still  is,  though  written  nearly 
half  a  century  ago.  That  a  great  part  of  the  working- 
men  employed  in  the  cities  were  not  carried  away  by 
the  Democratic-Populist  agitation  in  1896  and  1900  is 
probably  due  in  a  greater  measure  than  is  commonly 
realized  to  the  direct  and  indirect  influence  of  Marx, 
whose  economic  teachings  guided  the  socialists  in  their 
counter  agitation.  And  since  the  conditions  which  once 
gave  rise  to  a  demand  for  an  inflated  currency  have  by 
no  means  disappeared  beyond  a  possibility  of  return, 
this  book  has  a  wide  field  before  it,  outside  of  the  library 
of  the  college  and  of  the  student  of  economics,  which 
the  author's  name  and  prestige  with  the  working  class 
insures  for  it. 

There  is  another  reason,  if  any  need  be  given  why 
this  book  should  have  been  translated  into  English. 
Marx's  preface  to  the  present  work  contains  the  classic 
formulation  of  his  historico-philosophic  theory  known  as 
the  Materialistic  Interpretation  of  History.  This  the- 
ory, which  until  recently  was  entertained  almost  exclu- 
sively by  socialist  writers  and  was  hardly  heard  of  out- 
side of  socialist  circles  in  English  speaking  countries, 
is  at  last  receiving  not  only  due  recognition  but  sym- 
pathetic appreciation  at  the  hands  of  men  of  science.* 
It  is  rather  a  significant  coincidence  that  the  work 


*  Cf.    Seligman,  "The  Economic  Interpretation  of  History. 
MacMillan,  1902. 


which  for  the  first  time  clearly  formulated  the  law  gov- 
erning social  evolution  should  have  seen  the  light  of 
day  in  the  same  year  in  which  Darwin  gave  to  the  world 
his  theory  of  organic  evolution.  And  as  the  latter  had 
to  fight  its  way  to  recognition  in  the  teeth  of  religious 
prejudices,  so  has  the  recognition  of  the  former  been 
retarded  by  even  more  powerful  social  and  political 
jjrejudices. 

The  Introduction  to  the  Critique  of  Political  Econ- 
omy which  is  added  as  a  supplement  to  this  book  is  for 
the  first  time  published  in  book  form  in  any  language. 
It  was  written  by  Marx  in  1857,  but  for  reasons  ex- 
plained by  him  in  the  preface  was  not  published  and  in 
fact  was  never  finished  by  him,  since  according  to  his 
changed  plans  it  would  have  fitted  more  into  the  last 
volume  of  Capital  which  was  to  contain  a  history  of 
political  economy.  The  introduction  has  been  published 
but  lately  in  the  form  of  a  magazine  article  by  Karl 
Kautsky,  editor  of  the  Neue  Zeit  and  literary  executor 
of  Karl  Marx. 

A  few  explanations  are  here  in  order  with  reference 
to  the  work  of  translation.  No  one  is  more  keenly  alive 
to  the  shortcomings  of  the  English  rendering  of  the 
original  than  the  translator  himself.  While  fully  con- 
scious that  the  translation  might  be  greatly  improved, 
he  has  at  times  deliberately  sacrificed  literary  finish  to 
closeness  to  the  original.  It  will  be  found  that  many 
passages  have  been  rendered  more  clear  and  concise  in 
Capital  in  which,  according  to  Marx^s  own  statement  in 
the  preface  to  that  work,  they  were  much  simplified 
and  popularized.    The  Hegelian  phraseology  is  more  in 


^     6     — 

evidence  in  the  present  work  rendering  translation  a 
more  diBBcult  task.  Yet  for  that  very  reason  it  seemed 
particularly  desirable  to  give  to  English  speaking  read- 
ers as  close  a  version  of  the  original  as  was  possible.  In 
the  few  cases  where  certain  passages  from  this  work 
were  reproduced  by  Marx  in  Capital,  the  translation  of 
the  latter  by  Moore  and  Aveling  was  freely  drawn  upon 
wife  slight  modifications  here  and  there. 

About  the  only  liberty  taken  with  Marx's  terminology 
has  been  in  the  case  of  the  word  **biirgerlich."  Marx 
speaks  here  of  "biirgerliche  Produktion''  and  "btirger- 
licher  Eeichthum''  and  "biirgerliche  Arbeit"  where  eight 
years  later  he  used  in  corresponding  passages  in  Capital 
the  word  "kapitalistische."  As  the  English  speaking 
reader  is  more  accustomed  to  hear  of  the  "capitalist" 
system  of  production  than  of  the  *^urgeois"  system  of 
production,  etc.,  the  translator  considered  Marx's  own 
change  of  this  term  within  a  few  years  from  the  publi- 
cation of  "Zur  Kritik"  a  sufficient  justification  for  ren- 
dering the  word  ''biirgerlich"  into  "capitalistic"  wher- 
ever it  seemed  more  likely  to  carry  the  meaning  home  to 
the  reader. 

In  view  of  the  fact  that  the  work  is  likely  to  be  read 
in  wide  circles  it  was  thought  desirable  to  translate  the 
numerous  quotations  from  Italian,  Greek,  Latin  and 
French  writers,  the  translation  being  given  side  by  side 
with  the  original  quotation.  All  English  citations  given 
by  Marx  in  German  have  been  restored  from  the  original 
sources,  which  necessitated  the  use  of  four  libraries,  the 
Astor  and  the  Columbia  University  libraries  in  New 
York,  the  Congressional  Library  in  Washingrton,  and 


the  private  library  of  Professor  Seligman  to  whose  kind- 
ness the  translator  is  indebted  for  the  permission  to  use 
rare  works  of  the  seventeenth  century  quoted  by  Marx. 
Several  of  Marx's  references  to  the  pages  of  the  books 
quoted  by  him  have  been  found  to  be  wrong  and  there- 
fore differ  here  from  those  given  in  the  original.  In 
two  or  three  cases  where  the  original  English  citations 
could  not  be  found  they  were  retranslated  from  German 
with  the  quotation  marks  omitted. 

This  statemen*^  would  be  incomplete  if  the  translator 
failed  to  mentioi  the  helpful  participation  in  this  work 
by  his  wife  whose  share  in  the  translation  is  equal  to 
his  own. 


New  York,  October,  1903. 


AUTHOR'S    PREFACE, 


I  consider  the  system  of  bourgeois  economy  in  the  fol- 
lowing order:  Capital,  landed  property,  wage  labor; 
state,  foreign  trade,  world  market.  Under  the  first  three 
heads  I  examine  the  conditions  of  the  economic  existence 
of  the  three  great  classes,  which  make  up  modern  bour- 
geois society;  the  connection  of  the  three  remaining 
heads  is  self  evident.  The  first  part  of  the  first  book, 
treating  of  capital,  consists  of  the  following  chapters: 
1.  Commodity;  2.  Money,  or  simple  circulation;  3. 
Capital  in  general.  The  first  two  chapters  form  the 
contents  of  the  present  work.  The  entire  material  lies 
before  me  in  the  form  of  monographs,  written  at  long 
intervals  not  for  publication,  but  for  the  purpose  of 
clearing  up  those  questions  to  myself,  and  their  sys- 
tematic elaboration  on  the  plan  outlined  above  will  de- 
pend upon  circimastances. 

I  omit  a  general  introduction  which  I  had  prepared, 
as  on  second  thought  any  anticipation  of  results  that 
are  still  to  be  proven,  seemed  to  me  objectionable,  and 
the  reader  who  wishes  to  follow  me  at  all,  must  make 
up  his  mind  to  pass  from  the  special  to  the  general. 


—    10    — 

On  the  other  hand,  some  remarks  as  te  the  course  of 
my  own  politico-economic  studies  may  be  in  place  here. 

The  subject  of  my  professional  studies  was  jurispru- 
dence, which  I  pursued,  however,  in  connection  with  and 
as  secondary  to  the  studies  of  philosophy  and  history. 
In  1842-43,  as  editor  of  the  "Hheinische  Zeitung,"  I 
found  myself  embarrassed  at  first  when  I  had  to  take 
part  in  discussions  concerning  so-called  material  in- 
terests. The  proceedings  of  the  Ehine  Diet  in 
connection  with  forest  thefts  and  the  extreme  sub- 
division of  landed  property;  the  official  controversy 
about  the  condition  of  the  Mosel  peasants  into  which 
Herr  von  Schaper,  at  that  time  president  of  the  Rhine 
Province,  entered  with  the  "Rheinische  Zeitung ;"  finally, 
the  debates  on  free  trade  and  protection,  gave  me  the 
first  impulse  to  take  up  the  study  of  economic  questions. 
At  the  same  time  a  weak,  quasi-philosophic  echo  of 
French  socialism  and  communism  made  itself  heard  in 
the  *'Rheinische  Zeitung''  in  those  days  when  the  good 
intentions  "to  go  ahead"  greatly  outweighed  knowledge 
of  facts.  I  declared  myself  against  such  botching,  but 
had  to  admit  at  once  in  a  controversy  with  the 
"AUgemeine  Augsburger  Zeitung"  that  my  previous 
studies  did  not  allow  me  to  hazard  an  independent  judg- 
ment as  to  the  merits  of  the  French  schools.  When, 
therefore,  the  publishers  of  the  "Rheinische  Zeitung" 
conceived  the  illusion  that  by  a  less  aggressive  policy 
the  paper  could  be  saved  from  the  death  sentence  pro- 
nounced upon-  it,  I  was  glad  to  grasp  that  opportunity 
to  retire  to  my  study  room  from  public  life. 

The  first  work  imdertaken  for  the  solution  of  the 


—  11  -- 

question  that  troubled  me,  was'  a  critical  revision  of 
Hegers  ''Philosophy  of  Law*';  the  introduction  to  that 
work  appeared  in  the  "Deutsch-Franzosische  Jahr- 
biicher,"  published  in  Paris  in  1844.  I  was  led  by  my 
studies  to  the  conclusion  that  legal  relations  as  well  as 
forms  of  state  could  neither  be  understood  by  themselves, 
nor  explained  by  the  so-called  general  progress  of  the 
human  mind,  but  that  they  are  rooted  in  the  material 
conditions  of  life,  which  are  summed  up  by  Hegel  after 
the  fashion  of  the  English  and  French  of  the  eighteenth 
century  under  the  name  "civic  society;"  the  anatomy 
of  that  civic  society  is  to  be  sought  in  political  economy. 
The  study  of  the  latter  which  I  had  taken  up  in  Paris, 
I  continued  at  Brussels  whither  I  emigrated  on  account 
of  an  order  of  expulsion  issued  by  Mr.  Guizot.  The 
general  conclusion  at  which  I  arrived  and  which,  once 
reached,  continued  to  serve  as  the  leading  thread  in  my 
studies,  may  be  briefly  summed  up  as  follows:  In  the 
social  production  which  men  carry  on  they  enter  into 
definite  relations  that  are  indispensable  and  independent 
of  their  will;  these  relations  of  production  correspond 
to  a  definite  stage  of  development  of  their  material  pow- 
ers of  production.  The  sum  total  of  these  relations  of 
production  constitutes  the  economic  structure  of  society 
— the  real  foundation,  on  which  rise  legal  and  political 
superstructures  and  to  which  correspond  definite  forms 
of  social  consciousness.  The  mode  of  production  in 
material  life  determines  the  general  character  of  the 
social,  political  and  spiritual  processes  of  life.  It  is  not 
the  consciousness  of  men  that  determines  their  existence, 
but,  on  the  contrary,  their  social  existence  determines 


—     12     — 

their  consciousness.  At  a  certain  stage  of  their  develop- 
ment, the  material  forces  of  production  in  society  come 
in  conflict  with  the  existing  relations  of  production,  or — 
what  is  but  a  legal  expression  for  the  same  thing — 
with  the  property  relations  within  which  they  had  been 
at  work  before.  From  forms  of  development  of  the 
forces  of  production  these  relations  turn  into  their  fet- 
ters. Then  comes  the  period  of  social  revolution.  With 
the  change  of  the  economic  foundation  the  entire  im- 
mense superstructure  is  more  or  less  rapidly  trans- 
formed. In  considering  such  transformations  the  dis- 
tinction should  alwa^-s  be  made  between  the  material 
transformation  of  the  economic  conditions  of  produc- 
tion  which  can  be  determined  with  the  precision  of  nat- 
uralscience,  and  the  legal,  political,  religious,  aesthetic 
or  philosophic — in  short  ideological  forms  in  which  men 
become  conscious  of  this  conflict  and  fight  it  out  Just 
as  our  opinion  of  an  individual  is  not  based  on  what 
he  thinks  of  himself,  so  can  we  not  judge  of  such  a 
period  of  transformation  by  its  own  consciousness;  on 
the  contrary,  this  consciousness  must  rather  be  ex- 
plained from  the  contradictions  of  material  life,  from 
the  existing  conflict  between  the  social  forces  of  produc- 
tion and  the  relations  of  production.  No  social  order 
ever  disappears  before  all  the  productive  forces,  for 
which  there  is  room  in  it,  have  been  developed ;  and  new 
higher  relations  of  production  never  appear  before  the 
material  conditions  of  their  existence  have  matured 
in  the  womb  of  the  old  society.  Therefore,  mankind 
always  takes  up  only  such  problems  as  it  can  solve; 
since,  looking  at  the  matter  more  closely,  we  will  always 


—    13     — 

find  that  the  problem  itself  arises  only  when  the  material 
conditions  necessary  for  its  solution  already  exist  or 
are  at  least  in  the  process  of  formation.  ■  In  broad  out- 
lines we  can  designate  the  Asiatic,  the  ancient,  the  feudal, 
and  the  modem  bourgeois  methods  of  production  as  so 
many  epochs  in  the  progress  of  the  economic  formation  of 
society.  The  bourgeois  relations  of  production  are  the 
last  antagonistic  form  of  the  social  process  of  production 
— antagonistic  not  in  the  sense  of  individual  antagonism, 
but  of  one  arising  from  conditions  surrounding  the  life 
of  individuals  in  society;  at  the  same  time  the  produc- 
tive forces  developing  in  the  womb  of  bourgeois  society 
create  the  material  conditions  for  the  solution  of  that 
antagonism.  This  social  formation  constitutes,  there- 
fore, the  closing  chapter  of  the  prehistoric  stage  of 
human  society. 

Frederick  Engels,  with  whom  I  was  continually  cor- 
responding and  exchanging  ideas  since  the  appearance 
of  his  ingenious  critical  essay  on  economic  categories 
(in  the  "Deutsch-Franzosische  Jahrbiicher"),  came 
by  a  different  road  to  the  same  conclusions  as  my- 
self (see  his  "Condition  of  the  Working  Classes  in  Eng- 
land^').  When  he,  too,  settled  in  Brussels  in  the  spring 
of  1845,  we  decided  to  work  out  together  the  contrast 
between  our  view  and  the  idealism  of  the  German 
philosophy,  in  fact  to  settle  our  accoimts  with  our  former 
philosophic  conscience.  The  plan  was  carried  out  in 
the  form  of  a  criticism  of  the  post-Hegelian  philosophy. 
The  manuscript  in  two  solid  octavo  volumes  had  long 
reached  the  publisher  in  Westphalia,  when  we  received 
information  that  conditions  had  so  changed  as  not  to 
allow  of  its  publication.     We  abandoned  the  manuscript 


—     14    — 

to  the  stinging  criticism  of  tiie  mice  the  more  readily 
eince  we  had  accomplished  our  main  purpose — ^the  clear- 
ing up  of  the  question  to  ourselves.  Of  the  scattered 
writings  on  various  subjects  in  which  we  presented  our 
views  to  the  public  at  that  time,  I  recall  only  the  *'Mani- 
festo  of  the  Communist  Party"  written  by  Engels  and 
myself,  and  the  "Discourse  on  Free  Trade"  written  by 
myself.  The  leading  points  of  our  theory  were  first  pre- 
sented scientifically,  though  in  a  polemic  form,  in  my 
**Misere  de  la  Philosophic,  etc."  directed  against  Proud- 
hon  and  published  in  1847.  An  essay  on  "Wage  Labor," 
written  by  me  in  German,  and  in  which  I  put  together 
my  lectures  on  the  subject  delivered  before  the  German 
Workmen's  Club  at  Brussels,  was  prevented  from  leav- 
ing the  hands  of  the  printer  by  the  February  revolution 
and  my  expulsion  from  Belgium  which  followed  it  as  a 
consequence. 

The  publication  of  the  ^'Neue  Rheinische  Zeitung" 
in  1848  and  1849,  and  the  events  which  took  place  later 
on,  interrupted  my  economic  studies  which  I  could  not 
resume  before  1850  in  London.  The  enormous  material 
on  the  history  of  political  economy  which  is  accumulated 
in  the  British  Museum;  the  favorable  view  which  Lon- 
don offers  for  the  observation  of  bourgeois  society; 
finally,  the  new  stage  of  development  upon  which  the 
latter  seemed  to  have  entered  with  the  discovery  of  gold 
in  California  and  Australia,  led  me  to  the  decision  to 
resume  my  studies  from  the  very  beginning  and  work 
up  critically  the  new  material.  These  studies  partly 
led  to  what  might  seem  side  questions,  over  which  I 
nevertheless  had  to  stop  for  longer  or  shorter  periods  of 


—  15  — 

time.  Especially  was  the  time  at  my  disposal  cut  down 
by  the  imperative  necessity  of  working  for  a  living.  My 
work  as  contributor  on  the  leading  Anglo-American 
newspaper,  the  *T^ew  York  Tribune,"  at  which  I  have 
now  been  engaged  for  eight  years,  has  caused  very  great 
interruption  in  my  studies,  since  I  engage  in  newspaper 
work  proper  only  occasionally.  Yet  articles  on  important 
economic  events  in  England  and  on  the  continent  have 
formed  so  large  a  part  of  my  contributions  that  I  have 
been  obliged  to  make  myself  familiar  with  practical 
details  which  lie  outside  the  proper  sphere  of  political 
economy. 

This  account  of  the  course  of  my  studies  in  political 
economy  is  simpl}'^  to  prove  that  my  views,  whatever  one 
may  think  of  them,  and  no  matter  how  little  they  agree 
with  the  interested  prejudices  of  the  ruling  classes,  are 
the  result  of  many  years  of  conscientious  research.  At 
the  entrance  to  science,  however,  the  same  requirement 
must  be  put  as  at  the  entrance  to  hell : 

Qui  si  convien  lasciare  ogni  sospetto 
Ogni  vilta  convien  che  qui  sia  morta. 

Eabl  Maex. 
London,  January,  1859. 


Vvp. 


^^  4  ,j.^h^-^r^'' 


'\  k.,4rvv< 


CONTENTS. 

PAOE. 

Translator's  Preface    3 

Author'«   Preface   9 

BOOK  I.  CAPITAL  IN  GENERAL. 

Chaptci.'  I.     Commodities    19 

A.  Notes  on  the  History  of  the  Theory  of  Value 56 

Chapte*  II.     Money  or  Simple  Circulation 73 

1.  The  Measure  of  Value 74 

k    Theories  of  the  Unit  of  Measure  of  Money 91 

2.  The  Medium  of  Circulation 107 

a.  The  Metamorphosis  of  Commodities 108 

b.  The  Circulation  of  Money 125 

c.  Coin  and  Symbols  of  Value 138 

3.  Money    162 

a.  Hoarding 166 

b.  Means  of  Payment 185 

c.  World  Money 201 

4.  The  Precious  Metals 208 

C.  Theories  of  the  Medium  of  Circulation  and   of 

Money  215 

Appendix.     Introduction    to    the    Critique    of    Political 

Economy     264 

1 .  Production  in  General 265 

2.  The  General  Relation  of  Production  to  Dis- 

tribution, Exchange,  and  Consumption 274 

3.  The  Method  of  Political  Economy 292 

4.  Production,  Means  of  Production,  and  Con- 

ditions of  Production 306 

Index 313 


Capital  in  General. 


BOOK  L 

CHAPTER  I. 

COMMODITIES. 

r" 

At  first  sight!  tlie  wealth  of  society  under  the  capitalist 
system  presents  itself  as  an  immense  accumulation  of 
commodities,]  its  unit  being  a  single  commodity.  But 
every  commodity  has  a  twofold  aspect,  that  of  use  vdlu$ 
and  exchange  value.^ 

A  commodity  is  first  of  all,  in  the  language  of  EngliA 

^Aristotle,  d.  Rep.  L.  1,  c.  9  (edit.  I  Bekkeri  Oxonii,  1837)'. 

CSMTOV '>ap  KT^/Htarof  ivrrri  i^  \pii<ri^  itrTLv...if  fLiv  oiiceta,  19  J' ovc  ouc«t«  rmv' 
ir/MY^arof^Iov  v«-o2i)M.aTO«  ij  re  viroSyjo-t?  «cai  ij  /icto/SAtituc^.  'Afi^oTcp«u  y«P  »*•- 
£iJK<tro9  XprtvtK^'i  koX  yap  o  aAAarro^ecof  r<Z  SfOftiv^  viro£^|i.aTo«  afrl  t^f^ur^Mtrsc 
11  rpo^ffi  xPV^^^^V  viro^JJ^aTi  jj  inroS^jfi*,  iAA'  ou  ttji'  oiiceiaf  ;^p^o-n''  ow  yap  «AA«- 
y^  tytKtv  ytycvtv-  Tor  •vrbf  W  rpowof  ix^'-   ***    Tepi  twi'  aAAtar  «mf/A«[TiM'.** 

(•'Of  everything  which  we  possess  there  are  two  uses: — one 
is  the  proper,  and  the  other  the  improper  or  secondary  use  of 
it.  For  example,  a  shoe  is  used  for  wear,  and  is  used  for  ex- 
change; both  are  uses  of  the  shoe.  He  who  gives  a  shoe  in 
exchange  for  money  or  food  to  him  who  wants  one,  does  indeed 
use  the  shoe  as  a  shoe,  but  this  is  not  its  proper  or  primary 
purpose,  for  a  shoe  is  not  made  to  be  an  object  of  barter.  The 
same  may  be  said  of  all  possessions."  The  Politics  of  Aris- 
totle, translated  into  English  by  B.  Jowett,  Oxford,  1885^ 
T.  I.,  p.  16.) 


—     20     — 

economists,  "any  thing  necessary,  useful  or  pleasant  in 
life,"  an  object  of  human  wants,  a  means  of  existence  in 
the  broadest  sense  of  the  word.  This  property  of  com- 
modities to  serve  as  use-values  coincides  with  their 
natural  palpable  existence.  Wheat  e.  g.  is  a  distinct 
use-value  differing  from  the  use-values  cotton,  glass, 
paper,  etc.  Use-value  has  a  value  only  in  use  and  is 
realized  only  in  the  process  of  consumption.  The  same 
use-value  may  be  utilized  in  various  ways.  But  the  ex- 
tent of  its  possible  applications  is  circumscribed  by  its 
distinct  properties.  Furthermore,  it  is  thus  limited 
not  only  qualitatively  but  also  quantitatively.  Accord- 
ing to  their  natural  properties  the  various  use-values 
have  different  measures,  such  as  a  bushel  of  wheat,  a 
quire  of  paper,  a  yard  of  linen,  etc. 

Whatever  the  social  form  of  wealth  may  be,  use- 
values  always  have  a  substance  of  their  own,  in- 
dependent of  that  form.  One  can  not  tell  by  the 
taste  of  wheat  whether  it  has  been  raised  by  a 
Russian  serf,  a  French  peasant,  or  an  English 
capitalist.  Although  the  object  of  social  wants  and, 
therefore,  mutually  connected  in  society,  use-values  do 
not  bear  any  marks  of  the  relations  of  social  production. 
Suppose,  we  have  a  commodity  whose  use-value  is  that  of 
a  diamond.  We  can  not  tell  by  looking  at  the  diamond 
that  it  is  a  commodity.  When  it  serves  as  a  use-value, 
aesthetic  or  mechanical,  on  the  breast  of  a  harlot,  or  in 
the  hand  of  a  glasscutter,  it  is  a  diamond  and  not  a  com- 
modity. It  is  the  necessary  pre-requisite  of  a  commodity 
to  be  a  use-value,  but  it  is  immaterial  to  the  use-value 
whether  it  is  a  commodity  or  noi     Use-value  in  this 


—    21    — 

indifference  to  the  nature  of  its  economic  destination, 
i.  e.  use-value  as  such  Hes  outside  the  sphere  of  in- 
vestigation of  political  economy/  It  falls  within  the 
sphere  of  the  latter  only  in  so  far  as  it  forms  its  own 
economic  destination.  It  forms  the  material  basis 
which  directly  underlies  a  definite  economic  relation 
called  exchange  value. 

Exchange-value  appears  at  first  sight  as  a  quantita- 
tive relation,  as  a  proportion  in  which  use-values  are 
exchanged  for  one  another.  In  such  a  relation  they 
constitute  equal  exchangeable  quantities.  Thus,  a  vol- 
ume of  Propercius  and  eight  ounces  of  snuff  may  rep- 
resent the  same  exchange  value,  in  spite  of  the  dissim- 
ilar use-values  of  tobacco  and  elegy.  As  exchange-val- 
ue, one  kind  of  use-value  is  worth  as  much  as  another 
kind,  if  only  taken  in  right  proportion.  The  exchange 
value  of  a  palace  can  be  expressed  in  a  certain  number 
of  boxes  of  shoe-blacking.  On  the  contrary,  London 
manufacturers  of  shoe-blacking  have  expressed  the 
exchange  value  of  their  many  boxes  of  blacking,  in 
palaces.  Thus,  entirely  apart  from  their  natural  forms 
and  without  regard  to  the  specific  kind  of  wants  for 
which  they  serve  as  use-values,  commodities  in  certain 
quantities  equal  each  other,  take  each  other's  place  in 
exchange,  pass  as  equivalents,  and  in  spite  of  their 
variegated  appearance,  represent  the  same  entity. 

'That  is  the  reason  why  German  compilers  are  so  fond  of 
dwelling  on  use-value,  calling  it  a  "good."  See  ©.  g.  L.  Stein, 
"System  der  Staatswissenschaften,"  v.  I.,  chapter  on  "goods" 
(Glitter).  For  intelligent  information  on  "goods"  one  must 
turn  to  treatises  on  commodities. 


Use-values  are  primarily  means  of  existence.  These 
means  of  existence,  however,  are  themselves  products 
of  social  life,  the  result  of  expended  human  vital  pow- 
er, materialised  labor.  As  the  embodiment  of  social 
labor,  all  commodities  are  the  crystallization  of  the 
same  substance.  Let  us  now  consider  the  nature  of 
this  substance,  i.  e.,  of  labor,  which  is  expressed  in 
exchange  value. 

Let  one  ounce  of  gold,  one  ton  of  iron,  one  quarter 
of  wheat  and  twenty  yards  of  silk  represent  equal  ex- 
change values.  As  equivalents,  in  which  the  qualita- 
tive difference  between  their  use-values  has  been  elim- 
inated, they  represent  equal  volumes  of  the  same  kind 
of  labor.  The  labor  which  is  equally  embodied  in  all 
of  them  must  be  uniform,  homogeneous,  simple  labor. 
It  matters  as  little  in  the  case  of  labor  whether  it  be 
embodied  in  gold,  iron,  wheat,  or  silk,  as  it  does  in 
the  case  of  oxygen,  whether  it  appears  in  the  rust  of 
iron,  in  the  atmosphere,  in  the  juice  of  a  grape,  or  in 
the  blood  of  a  human  being.  But  the  digging  of  gold, 
the  extraction  of  iron  from  a  mine,  the  raising  of 
wheat  and  the  weaving  of  silk  are  so  many  kinds  of 
labor,  differing  in  quality.  As  a  matter  of  fact,  what 
in  reality  appears  as  a  difference  in  use-values,  is  in 
the  process  of  production,  a  difference  in  the  work 
creating  those  use-values.  Just  as  labor,  which  creates 
exchange  value,  is  indifferent  to  the  material  of  use- 
values,  so  it  is  to  the  special  form  of  labor  itself.  Fur- 
thermore, the  different  use-values  are  the  products  of 
the  work  of  different  individuals,  consequently  the  re- 
sult of  various  kinds  of  labor  differing  individually; 


from  one  another.  But  as  exchange  values,  they  rep- 
resent the  same  homogeneous  labor,  i.  c,  labor  from 
which  the  individuality  of  the  workers  is  eliminated. 
Labor  creating  exchange  value  is,  therefore,  abstract 
general  labor. 

If  one  ounce  of  gold,  one  ton  of  iron,  one  quarter  of 
wheat,  and  twenty  yards  of  silk  are  exchange  values  of 
equal  magnitude  or  equivalents;  then  one  ounce  of 
gold,  half  a  ton  of  iron,  three  bushels  of  wheat  and 
five  yards  of  silk  are  exchange  values  of  different 
magnitudes,  and  this  quantitative  difference  is  the  only 
difference  of  which  they  are  capable  as  exchange  val- 
ues. As  exchange  values  of  different  magnitudes,  they 
represent  greater  or  smaller  quantities  of  that  simple, 
homogeneous,  abstract,  general  labor,  which  forms 
the  substance  of  exchange  value.  The  question  arises, 
how  are  these  quantities  to  be  measured?  Or,  rather 
what  constitutes  the  substance  of  labor,  which  makes 
it  capable  of  quantitative  measurement,  since  the  quan- 
titative differences  of  commodities  in  their  capacity  of 
exchange  values  are  but  quantitative  differences  of  la- 
bor embodied  in  them.  Just  as  motion  is  measured  by 
time,  so  is  labor  measured  by  labor-time.  Given  the 
quality  of  labor,  the  difference  in  its  duration  is  the 
only  property  by  which  it  can  be  distinguished.  As  la- 
bor-time, labor  has  the  same  standard  of  measurement 
as  the  natural  time  measures,  viz.,  hours,  days,  weeks, 
etc.  Labor-time  is  the  vital  substance  of  labor,  inde- 
pendent of  its  form,  composition,  individuality ;  it  is  its 
vital  substance  quantitatively,  having  at  the  same  time 
its  own  inherent  measure.  Labor-time  embodied  in  the 


—    24    — 

use-values  of  commodities  is  the  substance  which 
makes  exchange  values  and,  therefore,  commodities  of 
them  and  at  the  same  time  serves  to  measure  definite 
quantities  of  their  value.  Corresponding  quantities  of 
different  use- values,  in  which  the  same  quantity  of  la- 
bor-time is  embodied,  are  equivalents ;  or,  to  put  it  in 
another  form,  all  use-values  are  equivalents  when 
taken  in  proportions  containing  the  same  quantity  of 
expended,  materialized  labor-time.  As  exchange  val- 
ues, all  commodities  are  but  definite  measures  of  con- 
gealed labor-time. 

To  understand  how  exchange  value  is  determined  by 
labor^ime,  the  following  main  points  must  be  kept  in 
mind:  The  reduction  of  labor  to  simple  labor,  devoid 
of  any  quality,  so  to  speak;  the  specific  ways  and 
means  by  which  exchange — value-creating,  i.  e.,  com- 
modity producing  labor  becomes  social  labor;  finally, 
the  difference  between  labor  as  the  producer  of  use- 
values,  and  labor  as  the  creator  of  exchange  values. 

In  order  to  measure  commodities  by  the  labor-time 
contained  in  them,  the  different  kinds  of  labor  must  be 
reduced  to  uniform,  homogeneous,  simple  labor,  in 
short,  to  labor  which  is  qualitatively  the  same,  and, 
therefore,  differs  only  in  quantity. 

This  reduction  appears  to  be  an  abstraction ;  but  it 
is  an  abstraction  which  takes  place  daily  in  the  social 
process  of  production.  The  conversion  of  all  commod- 
ities into  labor-time  is  no  greater  abstraction  nor  a  less 
real  process  than  the  chemical  reduction  of  all  organic 
bodies  to  air.  Labor,  thus  measured  by  time,  does  not 
appear  in  reality  as  the  labor  of  different  individuals, 


25 


but  on  the  contrary,  the  various  working  individuals 
rather  appear  as  mere  organs  of  labor ;  or,  in  so  far  as 
labor  is  represented  by  exchange  values,  it  may  be  de- 
fined as  human  labor  in  general.  This  abstraction  of 
human  labor  in  general  virtually  exists  in  the  average 
labor  which  the  average  individual  of  a  given  society 
can  perform — a  certain  productive  expenditure  of  hu- 
man muscles,  nerres,  brain,  etc.  It  is  unskilled  labor 
to  which  the  average  individual  can  be  put  and  which 
he  has  to  perform  in  one  way  or  another.  The  char- 
acter of  this  average  labor  varies  in  different  countries 
and  at  different  stages  of  civilization,  but  appears  fixed 
in  a  particular  society.  Unskilled  labor  constitutes  the 
bulk  of  all  labor  performed  in  capitalist  society,  as 
may  be  seen  from  all  statistics. 

It  is  obvious  that  if  A  spends  six  hours  in  the  pro- 
duction of  iron  and  six  hours  on  linen,  and  B  also  pro- 
duces iron  during  six  hours  and  linen  during  another 
six  hours,  it  is  but  a  different  application  of  the  same 
labor  time  that  would  be  expended,  if  A  produced  iron 
during  twelve  hours,  while  B  worked  twelve  hours  on 
linen.  But  how  about  skilled  labor  which  rises  above 
the  level  of  average  labor  by  its  higher  intensity,  by  its 
greater  specific  gravity?  This  kind  of  labor  resolves 
itself  into  unskilled  labor  composing  it;  it  is  simple 
labor  of  a  higher  intensity,  so  that  one  day  of  skilled 
labor,  e.  g.,  may  equal  three  days  of  unskilled  labor. 
This  is  not  the  place  to  consider  the  laws  regulating 
this  reduction.  It  is  clear,  however,  that  such  reduction 
does  take  place,  for,  as  exchange  value,  the  product  of 
the  most  skilled  labor  is,  when  taken  in  a  certain  pro- 


—    26    — 

portion,  equivalent  to  the  product  of  unskilled  average 
labor,  or  equal  to  a  definite  quantity  of  that  unskilled 
labor. 

The  determination  of  exchange-value  by  means  of 
labor-time  implies,  further,  the  fact  that  an  equal 
quantity  of  labor  is  embodied  in  any  given  commodity, 
e.  g.,  a  ton  of  iron,  no  matter  whether  it  is  the  work  of 
A  or  B,  that  is  to  say,  various  individuals  expend  an 
equal  amount  of  labor-time  for  the  production  of  the 
same  use-value  of  a  given  quality  and  quantity.  It  is 
thus  assumed  that  the  labor-time  contained  in  a  com- 
modity is  the  labor-time  necessary  for  its  production, 
i.  e.,  it  is  the  labor-time  which  is  required  for  the  pro- 
duction of  another  specimen  of  the  same  commodity 
under  the  same  general  conditions  of  production. 

The  conditions  of  labor,  which  creates  exchange 
value,  as  shown  by  the  analysis  of  the  latter,  are  social 
conditions  of  labor  or  conditions  of  social  labor.  So- 
cial, not  in  the  ordinary,  but  in  a  special  sense.  It  is 
a  specific  form  of  the  social  process.  The  homogene- 
ous simplicity  of  labor  means  first  of  all  equality  of 
the  labors  of  various  individuals,  a  reciprocal  relation 
of  equality  of  their  labors  determined  by  the  actual  re- 
duction of  all  kinds  of  labor  to  uniform  labor.  The 
labor  of  every  individual,  as  far  as  it  is  expressed  in 
exchange  value  possesses  this  social  character  of 
equality  and  finds  expression  in  exchange  value  only 
in  so  far  as  it  is  a  relation  of  equality  with  the  labor 
of  all  other  individuals. 

Furthermore,  the  labor-time  of  a  single  individual  is 
directly   expressed   in   exchange   value   as   universal 


—  sr  — 

labar-ttme,  and  this  ttniversal  character  of  individ- 
ual labor  is  the  manifestation  of  its  socicU  character. 
The  labor-time  represented  by  exchange  value  is  the 
labor-time  of  an  individual,  but  of  an  individual  undis- 
tinguished from  other  individuals  in  so  far  as  they  per* 
form  the  same  labor ;  therefore,  the  time  required  by 
one  individual  for  the  production  of  a  certain  commod- 
ity is  the  necessary  labor-time  which  any  other  indi- 
vidual would  have  to  spend  on  the  production  of  the 
same  commodity.  It  is  the  labor-time  of  an  individual, 
his  labor-time,  but  only  as  labor-time  common  to  all, 
regardless  as  to  which  particular  individual's  labor- 
time  it  is.  As  universal  labor-time  it  is  represented  in 
a  universal  product,  in  a  universal  equivalent,  in  a 
definite  quantity  of  materialized  labor-time ;  the  latter 
is  indifferent  as  to  the  particular  form  of  use-value  in 
which  it  appears  directly  as  the  product  of  an  indi- 
vidual, and  may  be  turned  at  will  into  any  other  form 
of  use-value  to  represent  the  product  of  any  other  in- 
dividual. Only  as  such  a  universal  quantity,  is  it  a 
social  quantity.  In  order  to  result  in  exchange  value, 
the  labor  of  an  individual  must  be  turned  into  a  uni-  i^ 
versal  equivalent,  i.  e.,  the  labor-time  of  an  indi- 
vidual must  be  expressed  as  universal  labor-time,  or 
universal  labor-time  as  that  of  an  individual.  It  is  the 
same  as  though  different  individuals  had  put  together 
their  labor-time  and  contributed  the  different  quanti- 
ties of  labor-time  at  their  common  disposal  in  the  form 
of  different  use-values.  The  labor-time  of  the  indi- 
vidual is  thus,  in  fact,  the  labor  time  which  society  re- 
quires for  the  production  of  a  certain  use-value,  i.  e., 


—    28    — 

for  the  satisfaction  of  a  certain  want.  But  the  ques- 
tion that  interests  us  here  is  as  to  the  specific  form  in 
which  labor  acquires  a  social  character.  Let  us  suppose 
that  a  certain  quantity  of  labor-time  of  a  spinner  is 
realized  in  100  lbs.  of  yarn.  Suppose  100  yards  of  lin- 
en, the  product  of  the  weaver,  represent  the  same 
quantity  of  labor-time.  Inasmuch  as  these  two  products 
represent  equal  quantities  of  universal  labor-time  and, 
hence,  are  equivalents  of  every  use-value  which  con- 
tains the  same  amount  of  labor-time,  they  are  also 
equivalent  to  each  other.  Only  because  the  labor-time 
of  the  spinner  and  that  of  the  weaver  take  the  form  of 
universal  labor-time  and  their  products  appear  as  uni- 
versal equivalents,  is  the  labor  of  the  weaver  realized 
for  the  spinner,  and  that  of  the  spinner,  for  the  weav- 
er, the  labor  of  one  takes  the  place  of  the  labor  of  the 
other,  i.  e.,  the  social  character  of  their  labors  is  real- 
ized for  both.  Quite  different  it  was  under  the  patri- 
archal system  of  production,  when  spinner  and  weaver 
lived  under  the  same  roof,  when  the  female  members 
of  the  family  did  the  spinning,  and  the  male  members 
did  the  weaving  to  supply  the  wants  of  their  own  fam- 
ily ;  then  yarn  and  linen  were  social  products,  spinning 
and  weaving  were  social  labor  within  the  limits  of  the 
family.  But  their  social  character  did  not  manifest  it- 
self in  the  fact  that  yam,  as  a  universal  equivalent, 
could  be  exchanged  for  linen  as  a  universal  equivalent, 
or  that  one  was  exchanged  for  another,  as  identical 
and  equivalent  expressions  of  the  same  universal  la- 
bor-time. It  was  rather  the  family  organization  with 
its  natural  division  of  labor  that  impressed  its  peculiar 


social  stamp  on  the  product  of  labor.  Or,  let  us  take 
the  services  and  payments  in  kind  of  the  Middle  Ages. 
It  was  the  specific  kind  of  labor  performed  by  each  in- 
dividual in  its  natural  form,  the  particular  and  not  the 
universal  aspect  of  labor,  that  constituted  then  the  so- 
cial tie.  Or,  let  us  finally  take  labor  carried  on  in  com- 
mon in  its  primitive  natural  form,  as  we  find  it  at  the 
dawn  of  history  of  all  civilized  races.*  It  is  clear  that 
in  this  case  labor  does  not  acquire  its  social  character 
from  the  fact  that  the  labor  of  the  individual  takes  on 
the  abstract  form  of  universal  labor  or  that  his  prod- 
uct assumes  the  form  of  a  universal  equivalent.  The 
very  nature  of  production  under  a  communal  system 
makes  it  impossible  for  the  labor  of  the  individual  to 
be  private  labor  and  his  product  to  be  a  private  prod- 
uct ;  on  the  contrary,  it  makes  individual  labor  appear 
as  the  direct  function  of  a  member  of  a  social  organ- 
ism. On  the  contrary,  labor,  which  is  expressed  in  ex- 
change value,  at  once  appears  as  the  labor  of  a  separ- 
ate individual.    It  becomes  social  labor  only  by  taking 

*A  ridiculous  presumption  has  gained  currency  of  late  to 
the  effect  that  common  property  in  its  primitive  form  is  spe- 
cifically a  Slavonian,  or  even  exclusively  Russian  form.  It 
is  the  primitive  form  which  we  can  prove  to  have  existed 
among  Eomans,  Teutons,  and  Celts;  and  of  which- numerous 
examples  are  still  to  be  found  in  India,  though  in  a  partly 
ruined  state.  A  closer  study  of  the  Asiatic,  especially  of  In- 
dian forms  of  communal  ownership  would  show  how  from  the 
different  forms  of  primitive  communism  different  forms  of  its 
dissolution  have  been  developed.  Thus  e.  g.  the  various  origi- 
nal types  of  Roman  and  Teutonic  private  property  can  be 
traced  back  to  various  forms  of  Indian  communism. 


—    so- 
on the  form  of  its  direct  opposite,  the  form  of  abstract 
universal  labor. 

Labor,  which  creates  exchange  value,  is,  finaliy,  char- 
acterized by  the  fact  that  even  the  social  relations  of 
men  appear  in  the  reversed  form  of  a  social  relation  of 
things.  Only  in  so  far  as  two  use-values  are  in  a 
mutual  relation  of  exchange  values  does  the  labor  of 
different  persons  possess  the  common  property  of  be- 
ing identical  universal  labor.  Hence,  if  it  be  correct  to 
say  that  exchange  value  is  a  relation  between  persons,* 
it  must  be  added  that  it  is  a  relation  disguised  under  a 
material  cover.  Just  as  a  pound  of  iron  and  a  pound  of 
gold  represent  the  same  weight  in  spite  of  their  differ- 
ent physical  and  chemical  properties,  so  do  two  use- 
values,  as  commodities  containing  the  same  quantity 
of  labor-time,  represent  the  same  exchange  value.  Ex- 
change value  thus  appears  as  the  natural  social  destina- 
tion of  use-values,  a  property  which  they  possess  by 
virtue  of  being  things  and  in  consequence  of  which 
they  are  exchanged  for  one  another  in  definite  propor- 
tions, or  form  equivalents,  just  as  chemical  elements 
combine  in  certain  proportions,  forming  chemical 
equivalents.  It  is  only  through  the  habit  of  everyday 
life  that  we  come  to  think  it  perfectly  plain  and  com- 
monplace, that  a  social  relation  of  production  should 
take  on  the  form  of  a  thing,  so  that  the  relation  of  per- 
sons in  their  work  appears  in  the  form  of  a  mutual  re- 

*"La  Ricchezza  h  una  ragione  tra  due  persone."  (**Value  is 
a  relation  l>etween  two  persons")  Galiani,  "Delia  MIoneta," 
p.  220  in  vol.  II.  of  Custodi's  collection  of  "Scrittori  classici 
Italiani  di  Eeonomia  Politioa.    Parte  Moderna,"  Milano,  1803. 


—    31    — 

lation  between  things,  and  between  things  and  persons. 

In  commodities  this  mystification  is  as  yet  very  sim- 
ple. It  is  more  or  less  plain  to  everybody  that  a  rela- 
tion of  commodities  as  exchange  values  is  nothing  but 
a  mutual  relation  between  persons  in  their  productive 
activity.  This  semblance  of  simplicity  disappears  in 
higher  productive  relations.  All  the  illusions  in  regard 
to  the  monetary  system  are  due  to  the  fact  that  money 
is  not  regarded  as  something  representing  a  social  re- 
lation of  production,  but  as  a  product  of  nature  en- 
dowed with  certain  properties.  The  modern  economists 
who  sneer  at  the  illusions  of  the  monetary  system,  be- 
tray the  same  illusion  as  soon  as  they  have  to  deal  with 
higher  economic  forms,  as,  e.  g.,  capital.  It  breaks 
forth  in  their  confession  of  naive  surprise,  when  what 
they  have  just  thought  to  have  defined  with  great  diffi- 
culty as  a  thing  suddenly  appears  as  a  social  relation 
and  then  reappears  to  tease  them  again  as  a  thing,  be- 
fore they  have  barely  managed  to  define  it  as  a  social 
relation. 

Since  the  exchange  value  of  commodities  is,  in  fact, 
nothing  but  a  mutual  relation  of  the  labors  of  individ- 
uals— labors  which  are  similar  and  universal — nothing 
but  a  material  expression  of  a  specific  social  form  of 
labor,  it  is  a  tautology  to  say  that  labor  is  the  only 
source  of  exchange  value  and  consequently  of  wealth, 

*"In  its  natural  state,  matter  ...  is  always  destitute 
of  value."  McCulloch,  "A  Discourse  on  the  Rise,  Progress, 
Peculiar  Objects,  and  Importance  of  Political  Economy/*  2nd 
edition,  Eddnburgh,  1825,  p.  48.  It  is  evident  how  high  even  a 
J^lfCulloch  stands  above  the  fetichism  of  German  "thinkers," 


—    32    — 

in  so  far  as  the  latter  consists  of  exchange  values. 
Similarly,  it  is  a  tautology  to  say  that  matter  in  its 
natural  state  has  no  exchange  value,  because  it  does 
not  contain  any  labor,  and  that  exchange  value  as  such 
does  not  contain  matter.  But  when  William  Petty 
calls  "labor  the  father  and  earth  the  mother  of  wealth,'* 
or  when  Bishop  Berkeley  asks  "whether  the  four  ele- 
ments and  man*s  labour  therein,  be  not  the  true  source 
of  wealth,"'  or  when  the  American,  Thomas  Cooper 
puts  it  popularly :  "Take  away  from  a  piece  of  bread 
the  labour  bestowed  by  the  baker  on  the  flour,  by  the 
miller  on  the  grain  brought  to  him,  by  the  farmer  in 
ploughing,  sowing,  tending,  gathering,  threshing, 
cleaning  and  transporting  the  seed,  and  what  will  re- 
main? A  few  grains  of  grass,  growing  wild  in  the 
woods,  and  unfit  for  any  human  purpose*" — ^then  all 
these  views  do  not  refer  to  abstract  labor  as  the  source 
of  exchange  value,  but  to  concrete  labor  as  the  source 
of  material  wealth;  in  short,  to  labor  in  so  far  as  it 
produces  use-values.  In  assuming  that  a  commodity 
has  use-value  we  assume  the  special  usefulness  and 
distinct  fitness  of  the  labor  absorbed  by  it,  but  that  is 
all  there  is  to  the  view  of  labor  as  useful  labor  from 
the  standpoint  of  commodity.  Considering  bread  as 
a  use-value,  we  are  interested  in  its  properties  as 
an  article  of  food  and  not  at  all  in  the  different  kinds 
of  labor  of  the  farmer,  miller,  baker,  etc.  If  by  some 
who  declare  "matter**  and  half  a  dozen  other  foreign  things 
to  be  elements  of  value.    Cf.  e.  g.  L.  Stein,  1.  c.  v.  I.,  p.  110. 

^Berkeley,  The  Querist,  (London,  1750. 

'Thomas  Ck)oper,  Lectures  on  the  Elements  of  Political 
Economy,  London,  18-31,  p.  99. 


—     33     — 

invention  nineteen-twentieths  of  this  labor  could  be 
saved,  the  loaf  of  bread  would  still  render  the  same 
service  as  before.  If  it  fell  ready-made  from  the  sky 
it  would  not  lose  a  single  atom  of  its  use-value.  While 
labor  which  creates  exchange  value  is  realized  in  the 
equality  of  commodities  as  universal  equivalents,  labor 
as  a  productive  activity  with  a  useful  purpose  is  real- 
ized in  the  endless  variety  of  use-values  created  by  it. 
While  labor  which  creates  exchange  values  is  abstract, 
universal  and  homogeneous,  labor  which  produces  use- 
values  is  concrete  and  special  and  is  made  up  of  an 
endless  variety  of  kinds  of  labor  according  to  the  way 
in  which  and  the  material  to  w^hich  it  is  applied. 

It  is  wrong  to  speak  of  labor  in  so  far  as  it  is  ap- 
plied to  the  production  of  use-values  as  of  the  only 
source  of  wealth,  namely,  the  material  wealth  produced 
by  it.  Being  an  activity  intended  to  adapt  materials  to 
this  OT  that  purpose,  it  requires  matter  as  a  pre-requi- 
site.  In  different  use-values  the  proportion  between 
labor  and  raw  material  varies  greatly,  but  use-value 
always  has  a  natural  substratum.  Labor,  as  an  activity, 
directed  to  the  adaptation  of  raw  material  in  one  form 
or  another,  is  a  natural  condition  of  human  existence, 
a  condition  of  exchange  of  matter  between  man  and 
nature,  independent  of  all  social  forms.  On  the  con- 
trary, labor  producing  exchange  value  is  a  specifically 
social  form  of  labor.  Tailoring,  e.  g.,  in  its  material 
manifestation  as  a  distinct  productive  activity,  pro- 
duces a  coat,  btit  not  the  exchange  value  of  the  coat. 
The  latter  is  produced  not  by  the  labor  of  the  tailor  as 
such,  but  by  abstract  universal  labor,  and  that  belongs 


-«    34    — 

to  a  certain  organization  of  society  which  has  not  been 
brought  about  by  the  tailor.  Thus,  the  women  under 
the  ancient  system  of  house  industry  made  coats  with- 
out producing  the  exchange  value  of  the  coats.  Labor 
as  a  source  of  material  wealth  was  known  to  Moses, 
the  legislator,  as  well  as  to  Adam  Smith,  the  customs 
official/ 

Let  us  consider  now  some  propositions  which  fol- 
low from  the  determination  of  exchange  value  by 
labor-time. 

As  a  use-value,  every  commodity  owes  its  usefulness 
to  itself.  Wheat,  e.  g.,  serves  as  an  article  of  food.  A 
machine  saves  labor  to  a  certain  extent.  This  function 
of  a  commodity  by  virtue  of  which  it  serves  only  as 
use-value,  as  an  article  of  consumption,  may  be  called 
its  service,  the  service  which  it  renders  as  use-value. 
But  as  an  exchange  value,  a  commodity  is  always  re- 
garded as  a  result ;  the  question  in  this  case  is  not  as 
to  the  service  which  it  renders,  but  as  to  the  service* 
which  it  has  been  rendered  in  its  production.  Thus, 
the  exchange  value  of  a  machine  is  determined  not  by 

*F.  List  could  never  grasp  the  difference  between,  labor  as  a 
source  of  use-value  and  labor  as  the  creator  of  certain  social 
form  of  wealth  or  exchange  value,  because  comprehension  was 
altogether  foreign  to  his  practical  mind;  he,  therefore,  saw  in 
the  modern  English  economists  mere  plagiarists  of  Moses,  the 
Egyptian. 

'It  can  be  readily  understood  what  kind  of  "service"  is  ren- 
dered by  the  category  "service"  to  economists  of  the  type  of 
J.  B.  Say  and  F.  Bastiat,  whose  pondering  sagacity,  as  Mai- 
thus  has  justly  remarked,  always  abstracts  from  the  spe- 
cifically definite  forms  of  economic  relations. 


—     35    — 

the  quantity  of  labor-time  which  it  saves,  but  by  the 
quantity  of  labor-time  which  has  been  expended  on  its 
own  production  and  which  is,  therefore,  required  to 
produce  a  new  machine  of  the  same  kind. 

If,  therefore,  the  quantity  of  labor-time  required  for 
the  production  of  commodities  remained  constant, 
their  exchange  value  would  remain  the  same.  But  the 
ease  and  the  difficulty  of  production  are  constantly 
changing-.  If  the  productivity  of  labor  increases,  the 
same  use-value  will  be  produced  in  less  time.  If  the 
productivity  of  labor  declines,  more  time  will  be  re- 
quired for  the  production  of  the  same  use-value.  Thus, 
the  labor-time  contained  in  a  commodity  or  its  ex- 
change-\'-alue  is  a  variable  quantity,  increasing  or  di- 
minishing in  an  inverse  ratio  to  the  rise  and  fall  of  the 
productivity  of  labor.  The  productive  power  of  labor 
which  is  applied  in  the  manufacturing  industry  on  a 
predetermined  scale  dep>ends  in  the  agricultural  and 
extractive  industries  also  on  natural  conditions  which 
are  beyond  human  control.  The  same  labor  will  yield 
a  greater  or  less  output  of  various  metals,  according  to 
their  more  or  less  close  occurrence  in  the  earth's  crust. 
The  same  labor  may  be  embodied  in  two  bushels  of 
wheat  in  a  favorable  season,  and  only  in  one  in  an  un- 
favorable season.  In  this  case,  scarcity  or  abundance, 
as  natural  conditions,  seem  to  determine  the  exchange 
value  of  commodities,  because  they  determine  the  pro- 
ductivity of  certain  kinds  of  labor  which  depend  upon 
natural  conditions. 

Unequal  volumes  of  different  use-value  contain  the 
same  quantity  of  labor-time  or  the  same  exchange  value. 


—     36     — . 

The  smaller  the  volume  of  a  use-value  containing  a 
certain  quantity  of  labor-time  as  compared  with  other 
use-values,  the  greater  its  specific  exchange-value.  If 
we  find  that  certain  use-values,  such  as,  e.  g.,  gold,  silver, 
copper  and  iron,  or  wheat,  rye,  barley  and  oats,  form 
a  series  of  specific  exchange  values  which,  though  not 
retaining  exactly  the  same  numerical  ratio,  still  retain 
through  widely  remote  epochs  of  civilization  the  same 
rough  proportion  of  relatively  larger  and  smaller  quan- 
tities, we  may  draw  the  conclusion  that  the  progressive 
development  of  the  productive  powers  of  society  has 
equally,  or  approximately  so,  affected  the  labor-time 
necessary  for  the  production  of  the  various  commod- 
ities. 

The  exchange  value  of  a  commodity  is  not  revealed 
in  its  own  use-value.  But,  as  the  embodiment  of  uni- 
versal social  labor-time,  the  use-value  of  one  commod- 
ity bears  a  certain  ratio  to  the  use-values  of  other  com- 
modities. Thus,  the  exchange  value  of  one  commodity 
is  manifested  in  the  use-values  of  other  commodities. 
An  equivalent  is,  in  fact,  the  exchange  value  of  one 
commodity  expressed  in  the  use-value  of  another  com- 
modity. If  I  say,  e.  g.,  that  one  yard  of  linen  is  worth 
/two  pounds  of  coffee,  then  the  exchange  value  of  linen 
is  expressed  in  terms  of  the  use-value  of  coffee,  viz.,  in  a 
certain  quantity  of  that  use-value.  This  ratio  being 
given,  I  can  express  the  value  of  any  quantity  of  linen 
in  coffee.  It  is  clear  that  the  exchange  value  of  one 
commodity,  say  linen,  is  not  confined  to  the  ratio  of 
any  one  commodity,  e.  g.  coffee,  as  its  equivalent.  The 
quantity  of  universal  labor-time  which  is  represented 


—     37     — 

in  one  yard  of  linen  is  at  the  same  time  embodied  in 
an  endless  variety  of  volumes  of  use-values  of  all  other 
commodities.  The  use-value  of  any  other  commodity 
forms  the  equivalent  of  one  yard  of  linen,  in  the  pro- 
portion in  which  it  represents  the  same  quantity  of 
labor-time  as  that  yard  of  linen.  The  exchange  value 
of  this  single  commodity  is,  therefore,  fully  expressed 
in  the  endless  number  of  equations  in  which  the  use- 
values  of  all  other  commodities  form  its  equivalents. 
Not  until  the  exchange  value  of  a  commodity  is  ex- 
pressed in  the  sum  total  of  these  equations  or  of  the 
different  proportions  in  which  one  commodity  is  ex- 
changed for  every  other  commodity,  does  it  find  an 
exhaustive  expression  as  a  universal  equivalent;  e.  g., 
the  series  of  equations : 

1  yard  of  linen  =  5^  lb.  of  tea, 
1  yard  of  linen  =    2  lbs.  of  coffee, 
1  yard  of  linen  =    8  lbs.  of  bread, 
1  yard  of  linen  :=    6  yards  of  calico, 
may  be  represented  as  follows: 

1  yard  of  linen  =  ^  lb.  of  tea  +  /^  lb.  of  coffee  -{- 
2  lbs.  of  bread  +  1>2  yards  of  calico. 

Therefore,  if  we  had  before  us  the  sum  total  of  the 
equations,  in  which  the  value  of  a  yard  of  linen  is  ex- 
haustively expressed,  we  could  represent  its  exchange 
value  in  the  form  of  a  series.  As  a  matter  of  fact,  the 
series  is  an  endless  one,  since  the  circle  of  commodities, 
constantly  expanding,  can  never  be  closed  up.  But 
while  the  exchange  value  of  one  commodity  is  thus 
measured  by  the  use-values  of  all  other  commodities, 
the  exchange  values  of  all  the  other  commodities  are, 


38 


in  their  turn,  measured  by  the  use-value  of  this  one 
commodity/ 

If  the  exchange  value  of  one  yard  of  linen  is  expressed 
in  Yq.  lb.  of  tea,  or  2  lbs.  of  coffee,  or  6  yards  of  calico, 
or  8  lbs.  of  bread,  etc.,  it  follows  that  coffee,  tea,  calico, 
bread,  etc.,  are  equal  to  each  other  if  taken  in  the  same 
proportion  in  which  they  are  equal  to  the  third  article, 
linen ;  consequently,  linen  serves  as  the  common  measure 
of  their  exchange  values.  Every  commodity,  as  the 
embodiment  of  universal  labor-time,  i.  e.,  as  a  certain 
quantity  of  universal  labor-time,  expresses  in  turn  its 
exchange  value  in  definite  quantities  of  the  use-values 
of  all  other  commodities,  and  the  exchange  values  of  all 
the  other  commodities  are,  on  the  other  hand,  measured 
by  the  use-value  of  this  one  exclusive  commodity.  But 
as  an  exchange  value,  every  commodity  is  at  the  same 
time  the  one  exclusive  commodity  that  serves  as  a  com- 
mon measure  of  the  exchange  values  of  all  other  com- 
modities; and,  on  the  other  hand,  it  is  but  one  of  the 
many  commodities  in  the  entire  series  of  which  every 
commodity  expresses  directly  its  exchange  value. 

The  value  of  a  commodity  is  not  affected  by  the 
number  of  commodities  of  other  kinds.    But  the  length 


*  "Egli  6  proprio  ancora  delle  misure  d'aver  si  fatta  relatione 
colle  cose  misurate,  che  in  certo  modo  la  misurata  divien 
misura  della  misurante."  Montanari,  Delia  Moneta,  p.  48  in 
V.  Ill,  of  Custodies  "Scrittori  classici  Italiani  di  Economia 
Politica.  Parte  Antica."  ("It  is  the  property  of  measure  to  be 
in  such  a  relation  to  the  things  measured,  that  in  a  certain  way 
the  thing  measured  becomes  the  measure  of  the  measuring 
thing.") 


—     39     — 

of  the  series  of  equations  in  which  its  exchange  value  h 
realized  does  depend  upon  the  greater  or  less  varietv 
of  other  commodities.  The  series  of  equations  in  which 
the  value  of  coffee,  e.  g.,  is  represented,  indicates  the 
extent  to  which  it  is  exchangeable,  the  limits  within 
which  it  performs  the  function  of  an  exchange  value* 
The  exchange  value  of  a  commodity  as  an  embodiment 
of  universal  social  labor-time  is  expressed  in  its  equiv- 
alence to  an  endless  variety  of  use-values. 

We  have  seen  that  the  exchange  value  of  a  commodity 
varies  with  the  quantity  of  labor-time  directly  con- 
tained in  it.  Its  realized  exchange  value,  i.  e.,  its  ex- 
change value  expressed  in  the  use-values  of  other  com- 
modities, must  also  depend  on  the  proportion  in  which 
the  labor-time  spent  on  the  production  of  all  other  com- 
modities is  changing.  If,  e.  g.,  the  labor-time  required 
for  the  production  of  a  bushel  of  wheat  remained  con- 
stant, while  that  required  for  the  production  of  all 
other  commodities  doubled,  the  exchange  value  of  a 
bushel  of  wheat  expressed  in  its  equivalents  would  be- 
come half  as  large  as  before.  The  result  would  be  prac- 
tically the  same  as  if  the  amount  of  time  necessary  for 
the  production  of  one  bushel  of  wheat  had  been  re- 
duced by  one-half,  and  that  required  for  all  other  com- 
modities had  remained  unchanged.  The  value  of  com- 
modities is  determined  by  the  proportion  in  which  they 
can  be  produced  in  the  same  labor-time.  In  order  to 
see  what  possible  changes  this  proportion  may  undergo, 
let  us  take  two  commodities,  A  and  B. 

First  case.  Let  the  labor-time  required  for  the  pro- 
duction of  commodity  B  remain  unchanofed.     In  thai 


—     40     — 

case  the  exchange  value  of  A,  expressed  in  terms  of  B^ 
rises  and  falls  with  the  rise  and  fall  of  the  labor-time 
required  for  the  production  of  A. 

Second  case.  Let  the  labor-time  required  for  the  pro- 
duction of  commodity  A  remain  constant.  Then  the 
exchange  value  of  A,  expressed  in  terms  of  B,  falls  and 
rises  in  an  inverse  ratio  with  the  rise  and  fall  of  the 
labor-time  required  for  the  production  of  B. 

Third  case.  Let  the  labor-time  required  for  the  pro- 
duction of  commodities  A  and  B  rise  and  fall  in  equal 
proportion.  Then  the  expression  of  equivalence  of  A 
and  B  remains  unchanged.  If  through  some  cause  the 
productivity  of  all  kinds  of  labor  were  to  decline  uni- 
formly, so  that  the  production  of  all  commodities  would 
require  an  equally  increased  quantity  of  labor-time,  then 
the  value  of  all  commodities  would  rise,  though  the  ex- 
pression of  their  exchange  values  would  remain  un- 
changed, and  the  actual  wealth  of  society  would  de- 
crease, because  it  would  have  to  expend  more  labor- 
time  on  the  production  of  the  same  stock  of  use-values. 

Fourth  case.  Let  the  labor-time  required  for  the  pro- 
duction of  A  and  B  rise  and  fall,  but  not  uniformly ;  that 
is  to  say,  the  labor-time  required  for  the  production  of  A 
may  rise,  while  that  required  for  B  may  fall,  or  vice 
versa.  All  of  which  can  be  reduced  to  the  simple  case 
where  the  labor-time  required  for  the  production  of 
one  commodity  remains  unchanged,  while  that  required 
for  the  other  rises  or  falls. 

The  exchange  value  of  any  commodity  is  expressed 
in  the  use-value  of  any  other  commodity,  be  it  in  in- 
tegral units  or  in  fractions  thereof.    As  exchange  value. 


—     41     — 

every  commodity  is  capable  of  subdivision,  like  the 
labor-time  embodied  in  it.  The  equivalence  of  commod- 
ities is  independent  of  their  physical  divisibility  as  use- 
values,  just  as  the  sum  of  the  exchange  values  of  com- 
modities is  indifferent  to  the  change  of  form  which  use- 
values  have  to  undergo  when  converted  into  a  single 
new  commodity. 

So  far  we  have  considered  commodities  from  a  two- 
fold point  of  view,  as  use-values  and  exchange  values 
alternately.  But  a  commodity  as  such  is  a  direct  com- 
bination of  use-value  and  exchange  value;  and  it  is  a 
commodity  only  in  relation  to  other  commodities.  The 
actual  relation  between  commodities  constitutes  the 
process  of  their  exchange.  It  is  a  social  process  par- 
ticipated in  by  individuals  independent  of  each  other 
but  the  part  they  take  in  it  is  that  of  owners  of  com- 
modities only.  Their  mutual  relations  are  those-  of  their 
commodities,  and  thus  they  really  appear  as  conscious 
factors  of  the  process  of  exchange. 

A  commodity  is  a  use-value,  wheat,  linen,  a  diamond, 
a  machine,  etc.,  but  as  a  commodity  it  is,  at  the  same 
time,  not  a  use-value.  If  it  were  a  use-value  for  its 
owner,  i.  e.,  a  direct  means  for  the  satisfaction  of  his 
own  wants,  then  it  would  not  be  a  commodity.  To  him 
it  is  rather  a  non-use-value ;  it  is  merely  the  material 
depository  of  exchange-value,  or  simply  a  means  of  ex- 
change; as  an  active  bearer  of  exchange  value,  use-value 
becomes  a  means  of  exchange.  To  the  owner  it  is  a 
use-value  only  in  so  far  as  it  constitutes  exchange  value.* 

^  It  is  in  that  sense  that  Aristotle  ( see  the  passage  quoted  at 
the  b^inning  of  this  chapter)  conceives  exchange  value. 


—    42     —• 

It  has  yet  io  hscome  a  use-value,  viz.,  to  others.  Not 
being  a  use-value  to  its  owner,  it  is  a  use-value  to  the 
owners  of  other  commodities.  If  it  is  not,  then  the  labor 
expended  on  it  was  useless  labor,  and  the  result  of  that 
labor  is  not  a  commodit3^  On  the  other  hand,  the 
commodity  must  become  a  use-value  to  the  owner  him- 
self, because  his  means  of  existence  lie  outside  of  it  in 
the  use-values  of  commodities  not  belonging  to  him. 
In  order  to  become  a  use-value,  the  commodity  must 
meet  the  particular  want  of  which  it  is  the  means  of 
satisfaction.  Use-values  of  commodities  are  thus 
realized  use-values  through  a  universal  change  of  hands 
by  passing  from  the  hands  in  which  they  were  held  as 
means  of  exchange  into  those  where  they  become  use 
values.  Only  through  this  universal  transfer  of  com- 
modities does  the  labor  contained  in  them  become  use- 
ful labor.  In  this  process  of  their  mutual  interchange 
as  use-values,  commodities  do  not  acquire  any  new  eco- 
nomic forms.  On  the  contrary,  even  the  form  which 
marked  them  as  commodities  disappears.  Bread,  e.  g., 
by  changing  hands  from  the  baker  to  the  consumer  does 
not  change  its  identity  as  bread.  On  the  contrary,  it  is 
only  the  consumer  that  begins  to  regard  it  as  a  use- 
value,  as  a  certain  article  of  food,  while  in  the  hands  of 
the  baker  it  was  only  the  bearer  of  an  economic  rela- 
tion, a  palpable  yet  transcendental  object.  Thus,  the 
only  change  of  form  that  commodities  undergo  while 
becoming  use-values,  consists  in  the  fact  that  they  cease 
to  be,  as  a  matter  of  form,  non-use-values  to  their  own- 
ers, and  use-values  to  those  who  do  not  own  them.  To 
become  use-values  commodities    must    be    universally 


—     43     — 

alienated;  they  must  enter  the  sphere  of  exchange;  but 
they  are  subject  to  exchange  in  their  capacity  of  ex- 
change values.  Hence,  in  order  to  be  realized  as  use- 
values,  they  must  be  realized  as  exchange  values. 

While  the  single  commodity  appeared  from  the  stand- 
point of  use-value  as  something  independent,  as  ex- 
change value  it  was  regarded  first  of  all  in  its  relation 
to  all  other  commodities.  This  relation  was,  however, 
merely  theoretical,  imaginary.  It  becomes  real  only  in 
the  process  of  exchange.  On  the  other  hand,  a  com- 
modity is  an  exchange  value  in  so  far  as  a  certain  quan- 
tity of  labor-time  has  been  expended  on  it,  and  it  con- 
sequently represents  materialized  labor-time.  But  of 
itself  it  is  only  materialized  individual  labor-time  of  a 
particular  kind,  and  not  universal  labor-time.  There- 
fore, it  is  not  directly  an  exchange  value,  but  must  first 
become  such.  First  of  all,  it  is  an  embodiment  of  uni- 
versal labor-time  only  in  so  far  as  it  represents  labor- 
time  applied  to  a  definite  useful  purpose,  i.  e.,  when  it 
represents  a  use-value.  This  was  the  material  condi- 
tion under  which  alone  labor-time  contained  in  com- 
modities was  regarded  as  universal  social  labor.  Thus, 
while  a  commodity  can  become  a  use-value  only  after 
it  has  been  realized  as  an  exchange  value,  it  can,  on  the 
other  hand,  be  realized  as  an  exchange  value  only  if  it 
proves  to  be  a  use-value  in  the  process  of  alienation. 

A  commodity  can  be  alienated  as  a  use-value  only  to 
one  whom  it  serves  as  a  use-value,  i.  e.,  as  a  means  of  sat- 
isfying a  certain  want.  On  the  other  hand,  it  is  ex- 
changed for  another  commodity,  or,  if  we  put  ourselves 
on  the  side  of  the  owner  of  the  other  commodity,  it,  too, 


—     44     — 

can  be  alienated,  i.  e.,  be  realized,  only  if  brought  in 
contact  with  that  particular  want  of  which  it  is  the  ob- 
ject. In  the  universal  exchange  of  commodities  as 
use-values  the  basis  for  their  mutual  relations  is  in  their 
material  difference  as  distinct  objects  which  satisfy 
different  wants  by  their  specific  properties.  But  as 
mere  use-values,  they  are  indifferent  to  each  other,  and 
are  incommensurable.  As  use-values  they  can  be  ex- 
changed only  with  reference  to  certain  wants.  They 
are  exchangeable  only  as  equivalents,  and  they  are  equiv- 
alents only  as  equal  quantities  of  materialized  labor- 
time,  so  that  all  regard  to  their  natural  properties  as 
use-values  and  therefore  to  the  relation  of  the  com- 
modities to  particular  wants  is  eliminated.  On  the 
contrary,  a  commodity  is  realized  as  an  exchange  value 
by  replacing  as  an  equivalent  any  definite  quantity  of 
any  other  commodity,  regardless  of  whether  it  is  a  use- 
value  for  the  owner  of  the  other  commodity  or  not.  But 
to  the  owner  of  the  other  commodity  it  is  a  commodity 
only  in  so  far  as  it  is  a  use-value  to  him,  and  it  becomes 
an  exchange  value  to  its  owner  only  in  so  far  as  it  is  a 
commodity  to  that  other  person.  Thus,  the  same  rela- 
tion appears  as  a  proportion  between  commodities  as 
magnitudes  of  the  same  denomination,  but  differing 
qualitatively;  or,  as  an  expression  of  their  equivalence 
as  embodiments  of  universal  labor-time,  and,  at  the 
same  time,  as  a  relation  of  qualitatively  different  ob- 
jects, of  use-values  intended  for  the  satisfaction  of  par- 
ticular wants,  in  short,  a  relation  in  which  they  are  dis- 
tinguished as  actual  use-values.  But  this  equivalence 
and  non-equivalence  mutually  exclude  each  other.  Thus 


—    45     — 

we  have  before  us  not  only  a  vicious  circle  of  problems 
in  which  the  solution  of  one  implies  that  of  the  other, 
but  a  combination  of  contradicting  claims,  since  the 
fulfillment  of  one  is  directly  connected  with  that  of  its 
opposite. 

The  process  of  exchange  of  commodities  must  result 
both  in  the  unfolding  and  in  the  solution  of  these  con- 
tradictions, neither  of  which,  however,  can  appear  in 
that  process  in  this  simple  way.  We  have  only  observed 
how  commodities  are  mutually  related  to  each  other  as 
use-values,  i.  e.,  how  they  appear  as  use-values  within 
the  process  of  exchange.  The  exchange-value,  on  the 
contrary,  as  we  have  considered  it  so  far,  appeared  as  an 
abstraction  formed  in  our  own  minds,  or — if  we  may 
so  put  it — in  the  mind  of  the  individual  owner  of  com- 
modities, which  lie  stored  in  his  warehouse  as  use-values, 
and  weigh  upon  his  conscience  as  exchange  values.  In 
the  process  of  exchange,  however,  commodities  must  be 
not  only  use-values,  but  also  exchange  values  to  one 
another,  and  that  should  appear  as  their  own  mutual 
relation.  The  difficulty  which  we  first  encountered  was 
that  a  commodity  must  be  first  alienated  and  delivered 
to  its  purchasers  as  a  use-value,  in  order  to  appear  as  an 
exchange  value,  as  materialized  labor,  while  on  the  other 
hand  its  alienation  as  use-value  implies  its  being  an 
exchange  value.  But  let  us  assume  that  this  difficulty 
has  been  overcome.  Suppose  the  commodity  has  di- 
vested itself  of  its  use-value,  and  has  thereby  fulfilled 
the  material  condition  of  being  socially  useful  labor, 
instead  of  a  particular  labor  of  an  individual.  In  that 
case,  the  commodity  must  become  an  exchange  value, 


— -     46     — ■ 

a  universal  equivalent,  an  embodiment  of  universal 
labor-time  for  all  other  commodities  in  the  process  of 
exchange,  and  thus,  leaving  behind  its  limited  role  of  a 
particular  use-value,  acquire  the  ability  to  be  directly 
represented  in  all  use-values  as  its  equivalents.  But 
every  commodity  is  jiist  such  a  commodity,  appearing  as 
a  direct  incarnation  of  universal  labor-time  by  divesting 
itself  of  its  particular  use-value.  On  the  other  hand, 
however,  commodities  confront  each  other  in  the  pro- 
cess of  exchange  as  particular  commodities,  as  the  labor 
of  private  individuals  embodied  in  particular  use- values. 
Universal  labor-time  is  itself  an  abstraction,  which,  as 
such,  does  not  exist  for  commodities. 

Let  us  examine  the  series  of  equations  in  which  the 
exchange  value  of  a  commodity  finds  its  concrete  ex- 
pression, e.  g. : 

1  yard  of  linen  =    2  lbs.  of  coffee. 

1  yard  of  linen  r=  ^  lb.    of  tea. 

1  yard  of  linen  =  8  lbs.  of  bread,  etc. 
These  equations  simply  signify  that  equal  quantities 
of  universal  social  labor-time  are  embodied  in  one  yard 
of  linen,  two  pounds  of  coffee,  half  a  pound  of  tea,  etc. 
But  as  a  matter  of  fact  the  individud  labors  which  are 
represented  in  these  particular  use-values,  become  uni- 
versal, and,  in  that  form,  also  social  labor,  only  when 
they  are  actually  exchanged  for  one  another  in  pro- 
portion to  the  labor-time  contained  in  them.  Social 
labor-time  exists  in  these  commodities  in  a  latent  state, 
»o  to  say,  and  is  first  revealed  in  the  process  of  exchange. 
We  do  not  proceed  from  the  labor  of  individuals  as 
social  labor,  but,  on  the  contrary,  from  special  labor 


—     47     — 

of  private  individuals  which  appears  as  universal  social 
labor  only  b}^  divesting  itself  of  its  original  character 
in  the  process  of  exchange.  Universal  social  labor  is, 
therefore,  no  ready-made  assumption,  but  a  growing  re- 
sult. And  thus  we  are  confronted  with  a  new  difficulty, 
that  on  the  one  hand  commodities  must  enter  the  pro- 
cess of  exchange  as  embodiments  of  universal  labor- 
time,  while,  on  the  other  hand,  this  embodiment  of  the 
labor-time  of  individuals  as  social  labor-time  is  itself 
a  result  of  the  process  of  exchange. 

Every  commodity  becomes  an  exchange  value  by  di- 
vesting itself  of  its  use-value,  or  of  its  original  nature. 
The  commodity  must  therefore  assume  a  double  ca- 
pacity in  the  process  of  exchange.  But  that  second 
capacity  of  exchange  value  can  appear  only  in  the  shape 
of  another  commodity,  because  only  commodities  con- 
front each  other  in  the  process  of  exchange.  How  is  a 
particular  commodity  to  represent  directly  materialized 
universal  labor-time,  or — ^to  put  it  differently — ^how  is 
individual  labor-time,  which  is  embodied  in  a  particular 
commodity  to  be  made  directly  universal  in  character? 
The  concrete  expression  of  the  exchange  value  of  a 
commodity,  i.  e.,  of  every  commodity  as  a  universal 
equivalent,  is  represented  in  an  endless  series  of  equa- 
tions, such  as: 

1  yard  of  linen  =    2  lbs.  of  coffee. 

1  yard  of  linen  t=  y^  \h.    of  tea. 

1  yard  of  linen  =    8  lbs.  of  bread. 

1  yard  of  linen  t=    6  yards  of  ealico. 

1  yard  of  linen  =  etc. 
The  above  form  is  theoretical  in  so  far  af  commod- 


—    48    — 

ities  are  only  thought  of  as  definite  quantities  of  mate- 
rialized universal  labor-time.  But  the  capacity  of  a 
particular  commodity  to  serve  as  a  universal  equivalent 
from  a  mere  abstraction  becomes  a  social  result  of  the 
process  of  exchange  by  a  simple  inversion  of  the  above 
series  of  equations,  viz. : 

2  lbs.  of  coffee  =  1  yard  of  linen. 

^2  lb.  of  tea  =  1  yard  of  linen. 

8  lbs.  of  bread  =  1  yard  of  linen. 

6  yards  of  calico  =  1  yard  of  linen. 
While  coffee,  tea,  bread,  calico,  in  short,  all  commod- 
ities express  in  linen  the  labor-time  contained  in  them, 
the  exchange  value  of  linen,  on  the  other  hand,  unfolds 
itself  in  all  other  commodities  as  its  equivalents,  and 
the  labor-time  embodied  in  it  becomes  direct  universal 
labor-time,  which  is  equally  expressed  in  different  vol- 
umes of  all  other  commodities.  Linen  thus  becomes 
the  universal  equivalent  through  the  universal  action  of 
all  other  commodities  upon  it.  As  exchange  value,  every 
commodity  served  as  a  measure  of  value  of  all  other 
commodities.  Now,  on  the  contrary,  since  all  com- 
modities measure  their  exchange  values  by  means  of  a 
particular  commodity,  this  excluded  commodity  be- 
comes the  special  expression  of  exchange  value,  as  a 
universal  equivalent.  At  the  same  time,  the  endless 
series  of  equations  in  which  the  exchange  value  of 
every  commodity  was  expressed,  is  reduced  to  one  single 
equation  consisting  of  two  members.  The  equation 
2  lbs.  of  coffee  =  1  yard  of  linen  now  fully  expresses 
the  exchange  value  of  coffee,  for  in  this  expression  a 
yard  of  linen  appears  as  the  direct  equivalent  of  a  defi- 


—     49     — 

nite  quantity  of  every  other  commodity.  Thus,  within 
the  sphere  of  exchange  all  commodities  are  or  appear 
to  each  other  as  exchange  values  in  the  form  of  linen. 
The  proposition  that  commodities,  as  exchange  values, 
are  to  each  other  as  different  quantities  of  materialized 
universal  labor-time,  may  now  be  worded  to  the  effect 
that  commodities,  as  exchange  values,  represent  nothing 
but  different  quantities  of  the  same  article,  linen.  Uni- 
versal labor-time  thus  assumes  the  aspect  of  a  distinct 
thing,  as  a  commodity  existing  along  with  and  outside 
of  all  other  commodities.  At  the  same  time  the  equa- 
tion 2  lbs.  of  coffee  =  1  yard  of  lineji,  in  which  one 
commodity  appears  as  the  exchange  value  of  another, 
is  yet  to  be  realized.  Only  by  being  alienated  as  use 
value — which  depends  upon  whether  it  proves  to  be  in 
the  process  of  exchange  the  object  of  a  certain  want — 
does  the  commodity  actually  transform  its  existence  as 
coffee  into  the  existence  as  linen  and  thus  takes  on  the 
form  of  a  universal  equivalent  and  becomes,  indeed,  an 
exchange  value  for  all  other  commodities.  Conversely, 
since  all  commodities  are  turned  into  linen  by  being 
alienated  as  use-values,  linen  becomes  the  converted 
form  of  all  other  commodities,  and  only  as  a  result  of 
this  transformation  of  all  other  commodities  into  it, 
it  becomes  the  direct  embodiment  of  universal  labor- 
time,  i.  e.,  the  product  of  universal  exchange  and  of  the 
elimination  of  individual  labor.  If  commodities  thus 
assume  a  twofold  character  in  order  to  appear  as  ex- 
change values  to  each  other,  the  commodity  which  has 
been  singled  out  as  the  universal  equivalent  becomes, 
on  the  other  hand,  a  use-value  in  two  ways.     Besides 


—     50     — 

its  special  use-value  as  a  particular  commodity,  it  as- 
sumes a  universal  use-value.  This  latter  kind  of  use- 
value  constitutes  its  special  feature,  emanating  as  it 
does,  from  the  specific  part  which  the  commodity  plays 
as  a  result  of  the  universal  relation  which  all  other 
commodities  bear  toward  it  in  the  process  of  exchange. 
The  use-value  of  every  commodity  as  an  object  of  a 
particular  want,  has  a  different  value  in  different  hands, 
e.  g.,  it  has  a  different  value  in  the  hands  of  the  one  who 
disposes  of  it,  than  in  those  of  the  one  who  acquires  it. 
But  the  commodity  singled  out  as  the  universal  equiv- 
alent, is  now  an  object  of  a  universal  want  arising  from 
the  very  process  of  exchange,  and  it  has  the  same  use- 
value  to  everybody,  viz.,  that  of  serving  as  the  depos- 
itory of  exchange  value,  of  being  a  universal  means  of 
exchange.  Thus  we  find  in  one  commodity  the  solution 
of  the  contradiction  which  is  inherent  in  commodity  as 
such,  namely,  of  being  at  one  and  the  same  time  a  par- 
ticular use-value  and  a  universal  equivalent,  and,  there- 
fore, a  use-value  for  everybody  or  universal  use-value. 
Thus,  while  all  other  commodities  express  their  ex- 
change value  in  the  form  of  an  ideal  equation  with  the 
excluded  commodity — an  equation  yet  to  be  realized — 
the  use-value  of  the  special  commodity,  although  real, 
appears  in  the  process  itself  as  a  mere  form  which  is 
yet  to  be  realized  through  transformation  into  actual 
use-values.  Originally  the  commodity  appeared  simply 
fts  commodity,  as  universal  labor-time  embodied  in  a 
particular  use-value.  In  the  process  of  exchange,  all 
commodities  are  related  to  the  one  excluded  commodi 
ity  as  to  a  simple  commodity,  one  which  appears  as  the 


—     51     — 

embodiment  of  universal  labor-time  in  a  particular  use- 
value.  Thus,  particular  commodities  become  related  to 
one  particular  commodity  as  a  universal  commodity/ 
In  that  manner  the  mutual  relations  of  possessors  of 
commodities  based  on  the  fact  that  they  regard  their 
labor  as  imiversal  social  labor,  takes  on  the  aspect  of 
their  relations  to  commodities  as  exchange  values;  and 
the  mutual  relation  of  commodities  as  exchange  values 
appears  in  the  process  of  exchange  as  the  relation  of  all 
of  them  to  one  particular  commodity  as  to  a  specially 
adopted  means  of  expression  of  their  exchange  value; 
again,  from  the  point  of  view  of  that  particular  com- 
modity the  above  relation  appears  as  its  specific  relation 
to.  all  other  commodities,  and,  therefore,  as  its  own 
definite,  spontaneous,  social  character.  The  particular 
commodity  which  thus  appears  as  the  specially  adopted 
expression  of  the  exchange  value  of  all  other  commod- 
ities, or  the  exchange  value  of  commodities  as  a  particu- 
lar exclusive  commodity,  is  money.  Money  is  a  crystal- 
lization of  the  exchange  value  of  commodities  which  they 
themselves  form  in  the  process  of  exchange.  Thus,  while 
commodities  become  use-values  to  each  other  in  the 
process  of  exchange  by  casting  off  all  definite  forms  and 
entering  into  mutual  relations  in  their  direct  material 
shape,  they  must  assume  a  new  form,  viz.,  proceed  to 
the  formation  of  money  in  order  to  appear  as  exchange 
values  to  each  other.  Money  is  not  a  sjrmbol,  no  more 
than  the  commodity  aspect  of  a  use-value  is  a  symbol. 
That  a  social  relation  of  production  takes  the  form  of  an 
object  existing  outside  of  individuals,  and  that  the  defi- 
*  This  expression  is  used  by  Grenovesi. 


—  se- 
nile relations  into  which  individuals  enter  in  the  pro- 
cess of  production  carried  on  in  society,  assume  the 
form  of  specific  properties  of  a  thing,  is  a  perversion 
and  by  no  means  imaginary,  but  prosaically  real,  mys- 
tification marking  all  social  forms  of  labor  which  creates 
exchange  value.  In  money  this  mystification  appears 
only  more  strikingly  than  in  commodities. 

The  necessary  physical  properties  of  the  particular 
commodity  in  which  the  money  form  of  all  other  com- 
modities is  to  be  crystallized — ^as  far  as  they  are  di- 
rectly determined  by  the  nature  of  exchange  value — 
are:  divisibility  to  any  desired  extent,  homogeneity  of 
its  parts,  and  uniformity  of  all  the  specimens  of  the 
commodity.  As  an  embodiment  of  universal  labor-time 
it  must  be  homogeneous  in  its  structure  and  capable  of 
representing  only  quantitative  differences.  Another 
necessary  property  is  durability  of  its  use-value,  as 
it  must  last  through  the  process  of  exchange. 
The  precious  metals  excel  in  these  qualities.  Money 
not  being  a  result  of  a  scheme  or  agreement,  but  having 
been  produced  instinctively  in  the  process  of  exchange, 
a  great  variety  of  more  or  less  unsuited  commodities  had 
successively  performed  its  functions.  At  a  certain 
stage  of  development  of  the  process  of  exchange, 
the  necessity  arises  for  a  polar  distribution  of  the  func- 
tions of  exchange  value  and  use-value  among  commo- 
dities, so  that  one  commodity  e.  g.  should  act  as  a 
medium  of  exchange,  while  another  is  being  alienated 
as  a  use-value.  This  necessity  brings  it  about  that  one 
or  even  several  commodities  possessing  the  most  generally 
accepted  use-value,  begin,  incidentally  at  first,  to  play 


—     53    — 

the  part  of  money.  Even  if  not  direct  means  of  satis- 
fying existing  wants,  their  being  the  most  considerable 
material  constituent  part  of  wealth,  insures  to  them  a 
more  general  character  than  to  the  other  use-values. 

Direct  barter,  the  original  natural  form  of  exchange, 
represents  rather  the  beginning  of  the  transformation 
of  use-values  into  commodities,  than  that  of  commo- 
dities into  money.  Exchange  value  has  as  yet  no  form 
of  its  own,  but  is  still  directly  bound  up  with  use- 
value.  This  is  manifested  in  two  ways.  Production,  in 
its  entire  organization,  aims  at  the  creation  of  use- 
values  and  not  of  exchange  values,  and  it  is  only  when 
their  supply  exceeds  the  measure  of  consumption  that 
use-values  cease  to  be  use-values,  and  become  means  of 
exchange,  i.  e.,  commodities.  At  the  same  time,  they  be- 
come commodities  only  within  the  limits  of  being  direct 
use-values  distributed  at  opposite  poles,  so  that  the  com- 
modities to  be  exchanged  by  their  possessors  must  be  use- 
values  to  both, — each  commodity  to  its  non-possessor. 
As  a  matter  of  fact,  the  exchange  of  commodities  origin- 
ates not  within  the  primitive  communities,*  but  where 
they  end,  on  their  borders  at  the  few  points,  where  they 
come  in  contact  with  other  communities.  That  is  where 
barter  begins,  and  from  here  it  strikes  back  into  the  in- 
terior of  the  community,  decomposing  it.     The  various 

*  Aristotle  makes  the  same  remark  with  reference  to  the 
private  family  as  the  primitive  commimity.  But  the  prim- 
itive form  of  family  is  the  tribal  family,  from  the  historical 
dissolution  of  which  the  private  family  develops,     "ip  ^x**-  oivrji 

9fMTf  jcotvwi'tqi   (toOto  B'  e<Triv  oiKia)    ^avtpov  on  ovSdv  iffrtv  ep/yoy  airrrji   (name 

ly  rij\  iAAay^s)  "And  in  the  first  community,  which  is  the  family, 
this  art  is  obviously  of  no  use."    Jowett's  transl.  1.  c.) 


—     54    — 

use-values  which  first  become  commodities  in  the  barter 
between  different  communities,  such  as  slaves,  cattle, 
metals,  constitute  therefore  in  most  cases  the  first  money 
within  those  communities  themselves.  We  have  seen 
how  the  exchange  value  of  a  commodity  is  manifested 
the  more  perfectly  as  exchange  value,  the  longer  the 
series  of  its  equivalents  or  the  greater  the  sphere  of  ex- 
change of  that  commodity.  With  the  gradual  expansion 
of  barter,  the  increase  in  the  number  of  exchanges,  and 
the  growing  diversification  of  the  commodities  drawn 
into  exchange,  commodities  develop  into  exchange  val- 
ues, which  leads  to  the  formation  of  money  and  has 
a  destructive  effect  on  direct  barter.  The  econ- 
omists are  in  the  habit  of  ascribing  the  origin  of  money 
to  the  difficulties  which  are  encountered  in  the  way  of 
extensive  barter,  but  they  forget  that  these  difficulties 
arise  from  the  development  of  exchange  value  and  from 
the  fact  that  social  labor  becomes  universal  labor.  E.  g., 
commodities  as  use-values  can  not  be  subdivided  at  will, 
a  property  which  they  should  possess  as  exchange 
values.  Or,  a  commodity  belonging  to  A  may  be  a  use- 
value  to  B,  while  the  commodity  belonging  to  B  may  not 
have  any  use-value  to  A.  Or  the  owners  of  the  com- 
modities may  need  each  other's  indivisible  goods  in  un- 
equal proportions.  In  other  words,  under  the  pretence 
of  analyzing  simple  barter,  economists  bring  out  certain 
aspects  of  the  contradiction  which  is  inherent  in  com- 
modities as  entities  simultaneously  embodying  both  use- 
value  and  exchange  value.  On  the  other  hand,  they  con- 
sistently cling  to  the  idea  that  barter  is  the  natural  form 
of  exchange,  which  suffers  only  from  certain  technical 


—     55     — 

difficulties,  for  which  money  is  a  cunningly  devised  ex- 
pedient. Arguing  from  this  perfectly  superficial  view, 
an  ingenious  English  economist  has  rightly  maintained 
that  money  is  merely  a  material  instrument  like  a  ship 
or  a  steam-engine,  but  not  an  expression  of  a  social  rela- 
tion in  the  field  of  production  and  consequently  not  an 
economic  category;  and  that  it  is,  therefore,  wrong  to 
treat  the  subject  in  political  economy,  which  really  has 
nothing  in  common  with  technology/ 

The  world  of  commodities  implies  the  existence  of  a 
highly  developed  division  of  labor ;  this  division  is  mani- 
fested directly  in  the  great  variety  of  use-values,  which 
confront  each  other  as  particular  commodities  and  which 
embody  as  many  different  kinds  of  labor.  The  division 
of  labor  embracing  all  the  particular  kinds  of  productive 
occupations,  is  the  complete  expression  of  social  labor  in 
its  material  aspect  viewed  as  labor  creating  use-values. 
But  from  the  standpoint  of  commodities  and  within  the 
process  of  exchange,  it  exists  only  in  its  results,  in  the 
variety  of  the  commodities  themselves. 

The  exchange  of  commodities  constitutes  the  social 
metabolic  process,  i.  e.  the  process  in  which  the  exchange 
of  the  special  products  of  private  individuals  is  the  re- 

*  "Money  is,  in  fact,  only  the  instrument  for  carrying  on 
buying  and  selling  ( but,  if  you  please,  what  do  you  understand 
by  buying  and  selling?)  and  the  consideration  of  it  no  more 
forms  a  part  of  the  science  of  political  economy,  than  the  con- 
sideration of  ships,  or  steam  engines,  or  of  any  other  instru- 
ment employed  to  facilitate  the  production  and  distribution  of 
wealth.**  Th.  Hodgskin,  Popular  Political  Economy,  etc.  Lon- 
don, 1827,  p.  178,  179. 


—    56    — 

suit  of  certain  social  relations  of  production  into  which 
the  individuals  enter  in  this  interchange  of  matter.  As 
they  develop,  the  mutual  relations  of  commodities  crys- 
talize  into  various  aspects  of  the  universal  equivalent 
and  thus  the  process  of  exchange  becomes  at  the  same 
time  the  process  of  the  formation  of  money.  The  whole 
of  this  process  which  takes  the  form  of  a  succession  of 
processes,  constitutes  circulation. 

NOTES  ON  THE  HISTORY  OF  THE  THEORY  OF 
COMMODITIES. 

The  analysis  of  commodities  according  to  their  two- 
fold aspect  of  use-value  and  exchange  value  by  which 
the  former  is  reduced  to  work  or  deliberate  productive 
activity;  and  the  latter,  to  labor  time  or  homogeneous 
social  labor,  is  the  result  of  a  century  and  a  half  of  criti- 
cal study  by  the  classical  school  of  political  economy 
which  dates  from  William  Petty  in  England  and  Bois- 
guillebert  in  France*  and  closes  with  Ricardo  in  the 
former  country  and  Sismondi  in  the  latter. 

Petty  reduces  use-value  to  labor,  without  deceiving 
himself   as   to  the   natural   limitation  of   its   creative 


*A  comparative  study  of  the  writings  and  characters  of 
Petty  and  Boisguillebert,  outside  of  the  light  which  it  would 
throw  upon  the  difference  of  French  and  English  society  at 
the  end  of  the  seventeenth  and  the  beginning  of  the  eighteenth 
centuries,  would  disclose  the  origin  of  the  national  contrast 
between  English  and  French  Political  Economy.  T^e  same 
contrast  reasserts  itself  in  Ricardo  and  Sismondi. 


—    57     — 

power.  As  regards  concrete  labor,  he  sizes  it  up  in  the 
magnitude  of  its  social  aspect,  as  the  division  of  labor.^ 
This  view  of  the  source  of  material  wealth  does  not  re- 


*  Petty  had  illustrated  the  productive  power  inherent  in  the 
division  of  labor  on  a  much  grander  scale  than  that  was  done 
later  by  Adam  Smith.  See  his  "Essay  concerning  the  multi- 
plication of  mankind,  etc.,"  3rd  edition,  1686,  p.  35-36.  He 
not  only  brings  out  the  advantages  of  the  division  of  labor  on 
the  example  of  the  manufacture  of  a  watch,  as  Adam  Smith 
did  later  on  that  of  a  needle,  but  considers  also  a  city  and  an 
entire  country  from  the  point  of  view  of  a  large  manufacturing 
establishment.  The  Spectator,  of  November  26,  1711,  refers 
to.  this  "illustration  of  the  admirable  Sir  William  Petty." 
McCulloch  is,  therefore,  mistaken  when  he  supposes  that  the 
Spectator  confounded  Petty  with  a  writer  forty  years  hia 
junior.  See  McCulloch,  "The  Literature  of  Political  Econ- 
omy, a  classified  catalogue,"  London,  1845,  p.  105.  Petty  is 
conscious  of  being  the  founder  of  a  new  science.  His  method, 
he  says,  "is  not  yet  very  usual,  for  instead  of  using  only  com- 
parative and  superlative  Words,  and  intellectual  Arguments,** 
he  has  undertaken  to  speak  "in  Terms  of  Number,  W^eight  or 
Measure;  to  use  only  Arguments  of  Sense,  and  to  consider  only 
such  Causes,  as  have  visible  Foundations  in  Nature;  leaving 
those  that  depend  upon  the  mutable  Minds,  Opinions,  Appe- 
tites, and  Passions  of  particular  Men,  to  the  Consideration  ol 
others."  (Political  Arithmetick,  etc.,  London,  1699.  Preface.) 
(A  new  edition  of  "The  Economic  Writings  of  Sir  William 
Petty,"  edited  by  Chas.  Henry  Hull,  has  been  published  by  the 
University  Press  at  Cambridge,  1899.  The  above  passage  will 
be  found  in  vol.  I.,  p.  244,  The  further  references  are  given 
to  this  new,  more  accessible  edition.  Translator. )  His  wonder- 
ful keenness  shows  itself  e.  g.  in  the  proposal  to  transport  "all 
the  moveables  and  people  of  Ireland,  and  of  the  Highlands  of 
Scotland  .  .  .  into  the  rest  of  Great  Britain."  Thereby 
much  labor-time  would  be  saved,  the  productivity  of  labor  in- 


~     58    — 

main  more  or  less  fruitless  as  in  the  case  of  his  con- 
temporary, Hobbes,  but  leads  up  to  his  Political  Arith- 
metic, the  first  form  in  which  Political  Economy  is  dif- 
ferentiated as  an  independent  science. 

He  defines  exchange  value,  however,  just  as  it  appears 
in  the  process  of  exchange  of  commodities,  viz.  as 
money ;  and  money  he  defines  as  an  existing  commodity, 
gold  and  silver.  Laboring  under  the  ideas  of  the  mone- 
tary system,  he  declares  the  special  branch  of  labor  which 
is  devoted  to  the  production  of  gold  and  silver  as  the 
labor  which  determines  exchange  value.  What  he  really 
means  is  that  the  labor  of  members  of  society  must  pro- 


creased,  and  "the  King  and  his  Subjects  would  thereby  become 
more  Rich  and  Strong."  (Political  Arithmetick,  ch.  4,  p.  285.) 
Or  in  the  chapter  of  his  Political  Arithmetic  in  which  he 
proves  that  England's  mission  is  the  conquest  of  the  world's 
market  at  a  time  when  Holland  still  played  the  leading  part 
as  a  trading  nation  and  France  seemed  to  be  on  the  way  of 
becoming  the  ruling  trading  Power:  "That  the  King  of  Eng- 
land's Subjects,  have  Stock  competent  and  convenient,  to  drive 
the  Trade  of  the  whole  Commercial  World"  (1.  c,  ch.  10,  p. 
311).  "That  the  Impediments  of  England's  greatness  are  but 
contingent  and  removable"  (1.  c,  ch.  5,  p.  298).  A  singular 
humor  pervades  all  his  writings.  Thus,  he  shows  that  it  was 
by  material  means  that  Holland — at  that  time  the  model  coun- 
try with  English  economists,  just  as  England  is  with  conti- 
nental economists  to-day — conquered  the  world  market  "with- 
out such  Angelical  Wits  and  Judgments,  as  some  attribute  to 
the  Hollanders"  (1.  c,  p.  258).  He  advocates  "Liberty  of 
Conscience"  as  a  condition  of  trade,  because  "Dissenters  .  .  . 
are  .  .  .  patient  Men^  and  such  as  believe  that  Labour  and 
Industry  is  their  Duty  towards  God,"  and  "They  believe  that 
.     .     .     for  those  who  have  less  Wealth,  to  think  they  have 


—     59     — 

duce  not  direct  use-values,  but  commodities  or  use-values 
which  by  means  of  exchange  are  capable  of  assuming 
the  form  of  gold  and  silver,  i.  e.  of  money,  i.  e. 
of  exchange  value,  i.  e.  of  embodiments  of  universal 
labor.  His  example,  however,  shows  strikingly  that  the 
recognition  of  labor  as  the  source  of  material  wealth  by 
no  means  excludes  the  misconception  of  the  particular 
social  form  in  which  labor  constitutes  the  source  of  ex- 
change value. 

.In  his  turn,  Boisguillebert,  if  not  consciously, 
at  any  rate  actually  reduces  the  exchange  value  of  a  com- 
modity to  labor-time,  since  he  determines  "true  value" 
(la  juste  valeur)  by  the  right  proportion  in  which  the 
labor-time  of  individuals  is  distributed  among  the  sev- 
eral branches  of  industry,  and  defines  free  competition 
as  the  social  process  which  determines  these  correct  pro- 
portions.    At  the  same  time,  however,  and  in  contrast 

the  more  Wit  and  Understanding,  especially  of  the  things  of 
God  which  they  think  chiefly  belong  to  the  Poor."  "From 
whence  it  follows  that  Trade  is  not  fixt  to  any  species  of  Re- 
ligion as  such;  but  rather  ...  to  the  Heterodox  part  of 
the  whole"  (1.  c,  p.  262-264).  He  advocates  an  "allowance 
by  Publick  Tax"  for  those  "who  live  by  begging,  cheating, 
stealing,  gaming,  borrowing  without  intention  of  restoring," 
because  "it  were  more  for  the  publick  profit"  to  tax  the 
country  for  such  persons  "than  to  suffer  them  to  spend  ex- 
travagantly, at  the  only  charge  of  careless,  credulous,  and 
good  natured  People"  (p.  269-270).  But  he  is  opposed  to 
taxes  which  transfer  the  wealth  from  industrious  people  "to 
such  as  do  nothing  at  all,  but  eat  and  drink,  sing,  play,  and 
dance;  nay  such  as  study  the  Metaphysicks"  (ibid.).  Petty's 
writings  are  rarities  of  the  bookseller's  trade  and  are  to  bo 
found  only  in  scattered  poor  old  editions,  which  is  the  more 


—     «0    — 

with  Petty  he  wages  a  fanatical  war  against  money 
which,  by  its  interference,  disturbs  the  natural  equili- 
brium or  harmony  of  exchange  of  commodities  and,  like 
a  wanton  Moloch,  demands  all  natural  wealth  as  sacri- 
fice. It  is  true  that  this  assault  on  money  was  called 
forth  by  certain  historic  conditions.  Since  Boisguille- 
bert  attacked ',  the  blind  destructive  lust  after  gold  which 
possessed  the  court  of  Louis  XIV,  his  tax  collectors,  and 
his  nobility;  on  the  other  hand.  Petty  extolled  in  the 
greed  of  gold  the  mighty  impulse  which  spurred  on  the 
nation  in  her  industrial  development  and  in  her  conquest 

surprising  since  William  Petty  was  not  only  the  father  of 
English  Political  Economy,  but  also  the  ancestor  of  Henry 
Petty,  alias  Marquis  of  Lansdowne,  the  nestor  of  the  Eng- 
lish Whigs.  However,  the  Lansdowne  family  could  hardly 
bring  out  a  complete  edition  of  Petty's  works  without  pre- 
facing it '  with  his  biography,  and  what  can  be  said  of  most 
origines  of  the  great  Whig  families  holds  good  also  in  this 
case,  viz.,  "the  less  said  of  them  the  better."  The  keen-witted 
but  cynical  army  surgeon  who  was  as  ready  to  plunder  in  Ire- 
land under  the  shield  of  Cromwell  as  to  crawl  before  Charles  II. 
to  get  the  title  of  baron  which  he  needed  for  his  plunderings, 
is  a  model  hardly  fit  for  public  exhibition.  Besides  that.  Petty 
seeks  to  prove  in  most  of  his  writings  which  he  published  in  his 
lifetime,  that  England's  prosperity  reached  its  climax  under 
Charles  II.,  a  heterodox  view  for  the  hereditary  exploiters  of 
the  "glorious  revolution.*' 

»In  contrast  with  the  "black  art  of  finance"  of  his  time, 
Boisguillebert  says:  "La  science  financifere  n'est  que  la  con- 
naissance  approfondie  des  intfirSts  de  I'agriculture  et  du  com- 
merce." Le  Detail  de  la  France,  1697.  Eugfene  Daire's  edition 
of  Economistes  financiers  du  XVIII.  sifecle,  Paris,  1843,  vol.  I., 
p.  241. 


—     61    — 

of  the  world-market;  still,  there  asserts  itself  here  a 
deeper  antagonism  of  principles  which  constantly  re- 
curs between  true  English  and  true  French*  Political 
Economy.  Boisguillebert  sees,  in  fact,  only  the  material 
substance  of  wealth,  its  use-value,  the  enjoyment '  of  it, 
and  considers  the  capitalistic  form  of  labor,  i.  e.  the 
production  of  use-values  as  commodities  and  the  ex- 
change of  those  commodities,  as  the  natural  social  form 
in  which  individual  labor  attains  its  end.  When  he  is, 
therefore,  confronted  with  the  specific  character  of  capi- 
talistic wealth  as  in  the  case  of  money,  he  sees  in  it  the 
usurping  interference  of  extraneous  elements  and  gets 
into  a  rage  about  the  capitalist  system  of  labor  in  one 
form  while  utopian-like  he  praises  it  in  another.^ 
Boisguillebert  furnishes  us  with  proof  that  one  may 

*  But  not  Romance  Political  Economy,  since  the  Italians  re- 
produce the  contrast  between  the  English  and  French  econo- 
mists in  the  two  respective  schools  of  Naples  and  Milan,  while 
the  Spaniards  of  the  earlier  period  are  either  pure  Mercan- 
tilists; modified  mercantilists  like  Ustariz;  or,  like  Jovellanos 
(see  his  Obras,  Barcelona,  1839-40),  hold  to  the  "golden  mean" 
with  Adam  Smith. 

'"La  veritable  richesse  .  .  .  jouissance  entifere,  non 
seulement  des  besoins  de  la  vie,  mais  m€me  de  tous  les  super- 
flus  et  de  tout,  ce  qui  peut  fair  plaisir  &  la  sensualitfi,"  Bois- 
guillebert, "Dissertation  sur  la  nature  de  la  richesse,"  etc.> 
1,  c,  p.  403.  But  while  Petty  was  a  frivolous,  rapacious  and 
unprincipled  adventurer,  Boisguillebert,  though  an  intendant 
under  Louis  XIV,  championed  the  interests  of  the  oppressed 
classes  with  a  daring  that  was  equal  to  his  keenness  of  mind. 

■The  French  Socialism  of  the  Proudhon  type  suffers  from 
the  same  national  hereditary  disease. 


—    en- 
treat labor-time  as  the  measure  of  value  of  commo- 
dities, and  at  the  same  time  confound  labor  embodied 
in  the  exchange  value  of  commodities  and  measured  by 
time,  with  the  direct  natural  activity  of  individuals. 

The  first  sensible  analysis  of  exchange  value  as  labor- 
time,  made  so  clear  as  to  seem  almost  commonplace,  is 
to  be  found  in  the  work  of  a  man  of  the  New  World 
where  the  bourgeois  relations  of  production  imported 
together  with  their  representatives  sprouted  rapidly  in 
a  soil  which  made  up  its  lack  of  historical  traditions 
with  a  surplus  of  humus.  That  man  was  Benjamin 
Franklin,  who  formulated  the  fundamental  law  of  mod- 
ern political  economy*  in  his  first  work  which  he  wrote 
when  a  mere  youth  and  published  in  1721. 

He  declares  it  necessary  to  look  for  another  measure 
of  value  than  precious  metals.  That  measure  is  labor. 
"By  labor  may  the  value  of  silver  be  measured  as  well  as 
other  things.  As,  suppose  one  man  employed  to  raise 
com,  while  another  is  digging  and  refining  silver ;  at  the 
year's  end,  or  at  any  other  period  of  time,  the  complete 
produce  of  com,  and  that  of  silver,  are  the  natural  price 
of  each  other;  and  if  one  be  twenty  bushels,  and  the 
other  twenty  ounces,  then  an  ounce  of  that  silver  is  worth 
the  labor  of  raising  a  bushel  of  that  com.  Now  if  by 
the  discovery  of  some  nearer,  more  easy  or  plentiful 
mines,  a  man  may  get  forty  ounces  of  silver  as  easily  as 
formerly  he  did  twenty,  and  the  same  labor  is  still  re- 


*  "Benjamin  Franklin,  The  Works  of,  etc.,"  ed.  by  I.  Sparks, 
vol.  II.,  Boston,  1836.  "A  Modest  Inquiry  into  the  Nature  and 
Necessity  of  a  Paper  Currency." 


—  es- 
quired to  raise  twenty  bushels  of  corn,  then  two  ounces 
of  silver  will  be  worth  no  more  than  the  same  labor  of 
raising  one  bushel  of  corn,  and  that  bushel  of  com  will 
be  as  cheap  at  two  ounces,  as  it  was  before  at  one,  ceteris 
paribus.  Thus  the  riches  of  a  country  are  to  be  valued 
by  the  quantity  of  labor  its  inhabitants  are  able  to  pur- 
chase."^ Thus  Franklin  regards  labor-time  from  the  one- 
sided economic  point  of  view,  as  the  measure  of  value. 
The  transformation  of  actual  products  into  exchange 
values  is  self-evident  with  him  and  the  only  question  is  as 
to  finding  a  quantitative  measure  of  value.  "Trade,''  says 
he,  "in  general  being  nothing  else  but  the  exchange  of 
labour  for  labour,  the  value  of  all  things  is,  as  I  have 
said  before,  most  justly  measured  by  labour."^  Substi- 
tute the  word  "work"  for  "labor"  in  the  above  statement, 
and  the  confusion  of  labor  in  one  form  and  labor  in  an- 
other form  becomes  at  once  apparent.  Since  trade  con- 
sists e.  g.  in  the  exchange  of  the  respective  labors  of  the 
shoemaker,  miner,  spinner,  painter,  etc.,  does  it  follow 
that  the  value  of  shoes  is  most  justly  measured  by  the 
work  of  a  painter?  On  the  contrary,  Franklin  meant 
that  the  value  of  shoes,  mining  products,  yarn,  paintings, 
etc.,  is  determined  by  abstract  labor  which  possesses  no 
particular  qualities  and  can,  therefore,  be  measured  only 
quantitatively.^  But  since  he  does  not  develop  the  idea 
that  labor  contained  in  exchange  value  is  abstract  uni- 

» L.  c,  p.  265. 
»  L.  c,  p.  267. 

"  L.  c,  "Remarks  and  Facts  relative  to  the  American  Paper 
Money,"  1764. 


—     64     — 

versal  labor  which  assumes  the  form  ai  social  laDor  as  a 
result  of  the  universal  alienation  of  the  products  of  in- 
dividual labor,  he  necessarily  fails  to  recognize  in  money 
the  direct  embodiment  of  this  alienated  labor.  For  that 
reason  he  sees  no  inner  connection  between  money  and 
labor  which  creates  exchange  value,  and  considers  money 
merely  as  an  instrument  introduced  from  outside  into 
the  sphere  of  exchange  for  purposes  of  technical  con- 
venience.^ Franklin's  analysis  of  exchange  value  did 
not  exert  any  direct  influence  on  the  general  trend  of 
science,  because  he  discussed  only  special  questions  of 
political  economy  whenever  there  was  a  definite  practical 
occasion  for  it. 

The  contrast  between  useful  work  and  labor  which 
creates  exchange  value  agitated  all  Europe  during  the 
eighteenth  century  in  the  form  of  this  question:  what 
particular  kind  of  labor  constitutes  the  source  of  bour- 
geois wealth  ?  It  was  thus  assumed  that  not  every  kind 
of  labor  which  is  realized  in  use-values  or  yields  certain 
products  does  thereby  directly  create  wealth.  With  the 
physiocrats,  however,  as  well  as  with  their  opponents, 
the  burning  question  was  not,  what  kind  of  labor  creates 
value,  but  which  is  it  that  creates  surplus  value.  They 
approached  the  problem  in  its  complicated  form  before 
they  had  solved  it  in  its  elementary  form;  such  is  the 
historical  course  of  all  sciences  leading  them  by  a 
labyrinth  of  intersecting  paths  to  the  real  starting  points. 
Unlike  other  builders,  science  not  only  erects  castles  in 

*See  "Papers  on  American  Politics;  Remarks  and  Facta 
relative  to  the  American  Paper  Money,"  1764,  I.  c. 


—     65     — 

the  air,  but  constructs  separate  stories  of  the  building, 
before  it  has  laid  the  foundation.  Without  dwelling 
any  longer  on  the  physiocrats  and  omitting  quite  a  num- 
ber of  Italian  economists  who  in  some  more  or  less  in- 
genious ideas  came  close  to  a  correct  analysis  of  the  na- 
ture of  commodity/  we  pass  at  once  to  the  first  Briton 
who  elaborated  the  general  system  of  bourgeois  econ- 
omics. Sir  James  Steuart/  His  idea  of  exchange  value 
as'  well  as  all  the  abstract  categories  of  political  economy 
still  seem  to  be  with  him  in  the  process  of  differentiation 
from  the  material  elements  they  represent  and  therefore 
appear  quite  vague  and  unsettled.  In  one  place  he  de- 
termines real  value  hy  lahor-time  ("what  a  workman  can 
perform  in  a  day^'),  but  immediately  creates  confusion 
by  introducing  the  elements  of  wages  and  raw  material.'* 
In  another  place  his  struggle  with  the  material  sub- 
stance of  the  subject  he  treats  of  is  revealed  even  more 


*See  e.  g.  Galiani,  "Delia  Moneta,"  in  vol.  3  of  Scrittori 
Classici  italiani  di  Economia  politica  (Published  by  Custodi). 
Parte  Modema,  Milano,  1803.  "La  fatica,  he  says,  fe  Tunica 
ehe  da  valore  alia  cosa"  ("only  effort  can  give  value  to  any 
thing**).  The  designation  of  labor  as  "fatica,"  strain,  eflFort, 
is  characteristic  of  the  southerner. 

*  Steuart's  work,  "An  Inquiry  into  the  Principles  of  Political 
Economy,  being  an  Essay  on  the  Science  of  Domestic  Policy  in 
Free  Nations,"  appeared  first  in  London  in  two  quarto  vol- 
umes in  the  year  1767,  ten  years  before  Adam  Smith's  "Wealth 
of  Nations."  I  quote  from  the  Dublin  edition  of  1770.  (The 
references  to  pages  are  the  same  for  the  standard  Ix)ndon  edi- 
tion of  1767,  except  where  otherwise  stated.   Translator.) 

•Steuart,  I.  c,  vol.  I.,  p.  181-183. 


—     66    — 

strikingly.  He  cans  the  material  of  nature  contained 
in  a  commodity,  such  as  the  silver  in  a  silver  plate,  its 
"intrinsic  worth,"  while  the  labor-time  contained  in  it  he 
calls  *'useful  value,''  The  former,  he  says  "is  .  .  . 
something  real  in  itself,"  while  "the  value  of  the  second 
must  be  estimated  according  to  the  labour  it  has  cost  to 
produce  it.  .  .  .  The  labour  employed  in  the  modi- 
fication [of  the  substance]  represents  a  portion  of  a 
man's  time."* 

What  distinguishes  Steuart  from  his  predecessors  and 
followers  is  his  keen  differentiation  between  specifically 
social  labor  which  is  represented  in  exchange  value,  and 
concrete  labor  which  produces  use-values.  Labor,  he  says, 
which  through  its  alienation  creates  a  universal  equival- 
ent, I  call  industry.  Labor  as  industry  he  distinguishes 
not  only  from  concrete  labor,  but  from  all  other  social 
forms  of  labor.*  It  is  to  him  the  capitalistic  form  of 
labor  in  contrast  to  its  antique  and  mediaeval  forms. 
He  is  especially  interested  in  the  difference  between  cap- 
italistic and  feudal  labor,  of  which  he  had  observed  the 
latter  in  its  decaying  forms  both  in  Scotland  and  on  his 
extensive  travels  over  the  continent.  Steuart  knew,  of 
course,  very  well  that  products  took  on  the  form  of  com- 
modities and  commodities,  the  form  of  money  in  pre- 
capitalistic  epochs  as  well;  but  he  proves  conclusively 
that  it  is  only  in  the  capitalistic  period  of  production 
that  the  commodity  becomes  the  elementary  and  funda- 

» Steuart,  1.  c,  vol.  L,  p.  361-362. 

'Sec  chapter  I.,  book  II.,  vol.  I.  "of  the  reciprocal  conne*» 
tions  between  Trade  and  Industry"  (Translator}. 


67 


mental  form  of  wealth,  and  alienation  [of  commodities] , 
the  ruling  form  of  acquisition  and  that  consequently 
labor  creating  exchange  value  is  specifically  capitalistic 
in  its  character/ 

After  different  forms  of  concrete  labor,  such  as  agri- 
culture, manufacture,  navigation,  trade,  etc.,  had  each 
in  turn  been  declared  the  true  source  of  wealth,  Adam 
Smith  proclaimed  labor  in  general,  and  namely  in  its 
general  social  form  of  division  of  labor,  to  be  the  only 
source  of  material  wealth  or  use-values.  While  ignoring 
in  connection  with  the  latter  the  part  played  by  nature, 
he  is  troubled  by  it  when  he  comes  to  deal  with  purely 
social  wealth  i.  e.  exchange  value.  To  be  sure,  Adam  de- 
termines the  value  of  a  commodity  by  the  labor-time 
contained  in  it,  but  relegates  the  actual  application  of 
the  principle  to  pre-Adamic  times.  In  other  words, 
what  seems  to  him  true  from  the  standpoint  of  simple 
commodity,  ceases  to  be  clear  as  soon  as  the  higher  and 
more  complex  forms  of  capital,  wage-labor,  rent,  etc. 
take  its  place.  This  he  expresses  by  saying,  that  the 
value  of  commodities  used  to  be  measured  by  labor-time 
in  the  paradise  lost  of  bourgeois  society,  in  which  men 

*He  declares,  therefore,  the  patriarchal  form  of  agriculture 
which  is  devoted  to  the  direct  production  of  use-values  for  the 
owner  of  the  land,  to  be  an  "abuse,"  not  in  Sparta,  or  Rome, 
or  even  in  Athens,  but  in  the  industrial  countries  of  the  eigh- 
teenth century.  This  "abusive  agriculture"  is  not  "trade,"  but 
a  "direct  means  of  subsisting."  Just  as  capitalistic  agriculture 
clears  the  country  of  superfluous  mouths,  so  does  the  capital- 
istic mode  of  manufacture  clear  the  factory  of  superflu-^us 
hands. 


—    68    — 

dealt  with  each  other  not  as  capitalists,  wage-workers, 
landlords,  tenants,  usurers,  etc.,  but  merely  as  plain  pro- 
ducers of  commodities  which  they  exchanged.  He  con- 
stantly confuses  the  determination  of  the  value  of  com- 
modities by  the  labor-time  contained  in  them  with  the 
determination  of  their  value  by  the  value  of  labor.  He 
becomes  confused  in  working  out  the  details  and  fails 
to  see  the  objective  equalization  of  different  kinds  of  labor 
which  the  social  process  forcibly  carries  out,  mistaking 
it  for  the  subjective  equality  of  the  labors  of  individuals. 
The  transition  from  concrete  labor  to  labor  creating  ex- 
change value,  i.  e.  to  labor  in  its  fundamental  capitalistic 
form  he  tries  to  derive  from  the  division  of  labor.  Yet, 
while  it  is  true  that  private  exchange  implies  the  divis- 
ion of  labor,  it  is  false  to  maintain  that  division  of  labor 
implies  private  exchange.  Among  the  Peruvians,  e.  g., 
labor  was  divided  to  an  extraordinary  extent,  although 
there  was  no  private  exchange,  no  exchange  of  products, 
as  commodities. 

*  Thus  e.  g.,  Adam  Smith  says :  "Equal  quantities  of  labour, 
at  all  times  and  places,  may  be  said  to  be  of  equal  value  to  the 
labourer.  In  his  ordinary  state  of  health,  strength  and  spirits, 
in  the  ordinary  degree  of  his  skill  and  dexterity,  he  must  al- 
ways lay  down  the  same  portion  of  his  ease,  his  liberty,  and  his 
happiness.  The  price  which  he  pays  must  always  be  the  same, 
whatever  may  be  the  quantity  of  goods  which  he  receives  in 
return  for  it.  Of  these,  indeed,  it  may  sometimes  purchase  a 
greater  and  sometimes  a  smaller  quantity;  but  it  is  their  value 
which  varies,  not  that  of  the  labour  which  purchases  them. 
.  .  .  Labour  alone,  therefore,  never  varying  in  its  own 
value  ...  is  their  [commodities']  real  price,  etc.  Adam 
Smith   (Book  I.,  ch.  V..  p.  34,  Oxford,  1809.     Translator.) 


— -     69     — 

Contrary  to  Adam  Smith,  David  Ricardo  elaborated 
with  great  clearness  the  determination  of  the  value  of 
a  commodity  by  labor-time  and  showed  that  this  law  gov- 
erns also  such  relations  of  capitalistic  production  which 
seem  to  contradict  it  most.  Ricardo  confines  his  inves- 
tigations exclusively  to  the  quantitative  determination  of 
value  and  as  regards  the  latter  he  is  at  least  conscious  of 
the  fact  that  the  realization  of  the  law  depends  upon  cer- 
tain historical  conditions.  He  says,  namely,  that  the  de- 
termination of  value  by  labor-time  holds  good  for  com- 
modities "only  as  can  be  increased  in  quantity  by  the 
exertion  of  human  industry,  and  on  the  production  of 
which  competition  operates  without  restraint.^'^  What 
he  really  means  is  that  the  law  of  value  presupposes  for 
its  full  development  an  industrial  society  in  which  pro- 
duction is  carried  on  a  large  scale  and  free  competition 
prevails,  i.  e.  the  modern  capitalist  society.  In  all  other 
respects,  Ricardo  considers  the  capitalist  form  of  labor 
as  the  eternal  natural  form  of  social  labor.  He  makes 
the  primitive  fisherman  and  the  primitive  hunter 
straightway  exchange  their  fish  and  game  as  owners  of 
commodities,  in  proportion  to  the  labor-time  embodied 
in  these  exchange  values.  On  this  occasion  he  commits 
the  anachronism  of  making  the  primitive  fisherman  and 
primitive  hunter  consult  the  annuity  tables  in  current 
use  on  the  London  Exchange  in  the  year  1817  in  the  cal- 
culation relating  to  their  instruments.  The  "parallelo- 
grams of  Mr.  Owen'*  seem  to  be  the  only  form  of  society 

*  David  Ricardo,  "On  the  Principles  of  Political  Economy  and 
Taxation,"  3rd  edijiion,  London,  1821,  p.  3. 


—     70    — 

outside  of  the  bourgeois  form  with  which  he  was  ac- 
quainted. Although  confined  within  this  bourgeois 
horizon,  Eicardo  analyzes  the  bourgeois  economy — which 
looks  quite  different  to  deeper  insight  than  it  does  on 
the  surface — with  such  keen  power  of  theoretical  pene- 
tration that  Lord  Brougham  could  say  of  him:  *'Mr. 
Ricardo  seemed  as  if  he  had  dropped  from  another 
planet/' 

In  a  direct  controversy  with  Ricardo,  Sismondi 
lays  stress  upon  the  specifically  social  character  of 
labor  which  creates  exchange  value,^  and  says  it  is 
"characteristic  of  our  economic  progress"  to  reduce 
the  magnitude  of  value  to  the  necessary  labor-  time, 
to  the  relation  between  the  demand  of  society  as 
a  whole  and  the  quantity  of  labor  which  is  suf- 
ficient to  satisfy  this  demand.^  Sismondi  is  no  more 
laboring  under  Boisguillebert's  idea,  that  labor  which 
creates  exchange  value  is  adulterated  by  money ;  but  just 
as  Boisguillebert  denounced  money,  so  does  Sismondi  de- 
nounce large  industrial  capital.  In  Ricardo  political 
economy  reached  its  climax,  after  recklessly  drawing  its 
ultimate  conclusions,  while  Sismondi  supplemented  it  by 
impersonating  its  doubts. 

Since  Ricardo  gave  to  classical  political  economy  its 

*  Sismondi,  "Etudes  sur  rEconomic  Politique,"  t.  II.,  Brux- 
elles,  1837.  "C'est  Topposition  entre  la  valeur  usuelle  .  .  . 
et  la  valeur  ^changeable  k  laquelle  le  commerce  a  reduit  toute 
chose,"  p.  161.     [Paris  edition,  p.  229,  TransL] 

'Sismondi  1.  c,  p.  163-166  seq.  [Paris  edition,  230  etf. 
TransL] 


—     71     — 

final  shape,  having  formulated  and  elaborated  with  the 
greatest  clearness  the  law  of  the  determination  of  ex- 
chaQge  value  by  labor-time,  it  is  natural  that  all  the 
polemics  among  economists  should  center  about  him. 
Stripped  of  its  puerile^  form  this  controversy  comes 
down  to  the  following  points : 

First :  Labor  itself  has  exchange  value,  and  different 
kinds  of  labor  have  different  exchange  values.  We  get 
into  a  vicious  circle  by  making  exchange  value  the  meas- 
ure of  exchange  value,  because  the  measuring  exchange 
value  needs  a  measure  itself.  This  objection  may  be 
reduced  to  the  following  problem :  Given  labor-time  as 
the  intrinsic  measure  of  exchange  value,  develop  from 
that  the  determination  of  wages.  The  theory  of  wages 
gives  the  answer  to  that 

Second :  If  the  exchange  value  of  a  product  is  equal 
to  the  labor-time  contained  in  it,  then  the  exchange  value 
of  one  day  of  labor  is  equal  to  the  product  of  that  labor. 
In  other  words,  wages  must  be  equal  to  the  product  of 
labor.2  But  the  very  opposite  is  actually  the  case.  Ergo. 

*  Perhaps  the  silliest  to  be  found  are  the  annotations  of  J.  B. 
Say  to  the  French  translation  of  Ricardo,  made  by  Constancio, 
and  the  most  pedantically  arrogant  are  the  remarks  of  Mr. 
MacLeod  in  his  newly  published  "Theory  of  Exchange,"  Lon- 
don, 1858. 

'This  objection  raised  against  Ricardo  by  bourgeois  econ- 
omists was  taken  up  later  by  the  socialists.  Having  assumed 
the  correctness  of  the  formula,  they  charged  the  practice  with 
contradiction  to  the  theory  and  appealed  to  bourgeois  society 
to  realize  in  practice  the  conclusions  which  were  supposed  to 
follow  from  its  theoretical  principles.     That  was  at  least  the 


—     72     — 

this  objection  comes  down  to  the  following  problem: 
How  does  production,  based  on  the  determination  of 
exchange  value  by  labor-time  only,  lead  to  the  result 
that  the  exchange  value  of  labor  is  less  than  the  exchange 
value  of  its  product?  This  problem  is  solved  by  us  in 
the  discussion  of  capital. 

Third :  The  market  price  of  commodities  either  falls 
below  or  rises  above  its  exchange  value  with  the  changing 
relations  of  supply  and  demand.  Therefore,  the  ex- 
change value  of  commodities  is  determined  by  the  rela- 
tion of  supply  and  demand  and  not  by  the  labor-time 
contained  in  them.  As  a  matter  of  fact,  this  queer  con- 
clusion merely  amounts  to  the  question,  how  a  market 
price  based  on  exchange  value  can  deviate  from  that  ex- 
change value;  or,  better  still,  how  does  the  law  of  ex- 
change value  assert  itself  only  in  its  antithesis?  This 
problem  is  solved  in  the  theory  of  competition. 

Fourth :  The  last  and  apparently  the  most  striking 
objection,  if  not  raised  in  the  usual  form  of  queer  ex- 
amples :     If  exchange  value  is  nothing  but  mere  labor- 


way  in  which  the  English  socialists  turned  Ricardo's  formula 
of  exchange  value  against  political  economy.  It  remained  for 
Mr.  Proudhon  not  only  to  proclaim  the  fundamental  principle 
of  old  society  as  the  principle  of  the  new,  but  also  to  declare 
liimself  the  discoverer  of  the  formula  in  which  Ricardo  summed 
up  the  combined  results  of  classical  English  political  economy. 
It  has  been  proven  that  the  Utopian  interpretation  of  the  Ri- 
cardian  formula  was  about  forgotten  in  England  when  Mr. 
Proudhon  "discovered**  it  on  the  other  side  of  the  Canal.  (Cf. 
my  work:  **Mi8fere  de  la  Philosophie."  etc.,  Paris,  1847,  para- 
graph on  la  valeur  constitu^.) 


—     73     — 

time  contained  in  commodities,  how  can  commodities 
which  contain  no  labor  possess  exchange- value,  or  in 
other  words,  whence  the  exchange  value  of  mere  forces 
of  nature  ?     This  problem  is  solved  in  the  theory  of  rent. 


CHAPTER  II. 
MONEY  OR  SIMPLE  CIRCULATION. 

In  a  parliamentary  debate  on  Sir  Robert  PeeFs  Bank 
Act  of  1844  and  1845,  Gladstone  remarked  that  not  even 
love  has  made  so  many  fools  of  men  as  the  pondering 
over  the  nature  of  money.  He  spoke  of  Britons  to 
Britons.  The  Dutch,  on  the  contrary,  who,  from  times 
of  yore,  have  had,  Petty's  doubts  notwithstanding, 
''angelical  wits"  for  money  speculation  have  never  lost 
their  wits  in  speculations  about  money. 

The  main  difficulty  in  the  analysis  of  money  is  over- 
come as  soon  as  the  evolution  of  money  from  commodity 
is  understood.  This  point  once  granted,  it  only  remains 
to  comprehend  clearly  the  particular  forms  of  money, 
which  is  to  some  extent  made  difficult  by  the  fact  that 
all  bourgeois  relations,  being  gilt  or  silver  plated,  have 
the  appearance  of  money  relations,  and  money,  therefore, 
seems  to  possess  an  endless  variety  of  forms,  which  have 
nothing  in  common  with  it. 

Tn  the  following  investigation  only  those  forms  of 


—     74    — 

money  are  treated  of  which  directly  grow  out  of  the  ex- 
change of  commodities;  the  forms  which  belong  to  a 
higher  stage  of  production,  as  e.  g.,  credit  money  will 
not  be  discussed  here.  For  the  sake  of  simplicity  gold 
is  assumed  throughout  as  the  money  commodity. 

1.   THE  MEASURE  OF  VALUE. 

The  first  process  of  circulation  constitutes,  so  to  say, 
the  theoritical  preparatory  process  to  actual  circulation. 
To  begin  with,  commodities  which  are  use-values  by 
nature,  acquire  a  form  in  which  they  appear  in  idea  to 
each  other  as  exchange  values,  as  definite  quantities  of 
incorporated  universal  labor-time.  The  first  necessary 
step  in  this  process  is,  as  we  have  seen,  the  setting  apart 
by  the  commodities  of  a  specific  commodity,  say  gold,  as 
the  direct  incarnation  of  universal  labor-time,  or  the  uni- 
versal equivalent.  Let  us  go  back  for  a  moment  to  the 
form  in  which  commodities  turn  gold  into  money. 

1  ton  of  iron  =  2  ounces  of  gold 

1  quarter  of  wheat  =  1  ounce  of  gold 

1  hundred  weight  of  Mocca  coffee  =  1-4  ounce  of  gold 

1  hundred  weight  of  potash  =  ^  ounce  of  gold 

1  ton  of  Brazil  timber  =13^  ounces  of  gold 

Y  commodities  =  X  ounces  of  gold 

In  the  above  series  of  equations  iron,  wheat,  coffee, 
potash,  etc.  appear  to  each  other  as  embodiments  of 
homogeneous  labor,  namely,  as  labor  materialized  in 
money,  from  which  all  the  peculiarities  of  the  different 
kinds  of  concrete  labor  represented  in  the  different  use- 
values  are  completely  eliminated.    As  value  they  are  all 


—     75     — 

identical,  they  are  the  incarnation  of  the  same  labor,  or 
the  same  incarnation  of  labor,  viz.,  gold.  As  uniform  em- 
bodiments of  the  same  labor  they  display  only  one  differ- 
ence, a  quantitative  one,  by  appearing  as  different  quan- 
tities of  value,  because  unequal  quantities  of  labor-time 
are  contained  in  their  use-values.  The  mutual  relation 
of  these  separate  commodities  is  that  of  embodiments  of 
universal  labor-time,  since  they  are  related  to  universal 
labor-time  as  to  an  excluded  commodity,  viz.,  gold.  The 
same  relation  the  development  of  which  causes  commodi- 
ties to  appear  to  each  other  as  exchange  values,  causes 
the  labor  time  contained  in  gold  to  appear  as 
universal  labor-time,  a  given  quantity  of  which  is 
expressed  in  different  quantities  of  iron,  wheat,  coffee, 
etc, — in  short,  in  the  use-values  of  all  commodities,  or  is 
directly  unfolded  in  the  endless  series  of  commodity- 
equivalents.  While  all  commodities  express  their  ex- 
change values  in  gold,  gold  expresses  its  exchange  value 
directly  in  all  commodities.  While  commodities  assume 
the  form  of  exchange  value  in  relation  to  each  other, 
they  lend  to  gold  the  form  of  the  universal  equivalent, 
or  of  money. 

Grold  becomes  the  measure  of  value,,  because  all  com- 
modities measure  their  exchange  values  in  gold,  in 
proportion  as  a  certain  quantity  of  gold  and  a 
certain  quantity  of  the  commodity  contain  the  same 
amount  of  labor-time;  and  it  is  only  by  virtue  of  this 
function  of  being  a  measure  of  value,  in  which  capacity 
its  own  value  is  measured  directly  in  the  entire  series  of 
commodity  equivalents,  that  gold  becomes  a  universal 
equivalent  or  money.     On  the  other  hand,  the  exchange 


76 


value  of  all  commodities  is  expressed  in  gold.  In  this 
expression,  the  qualitative  aspect  is  to  be  distinguished 
from  the  quantitative :  there  is  the  exchange  value  of  the 
commodity  as  the  embodiment  of  the  same  uniform 
labor-time ;  while  the  magnitude  of  value  is  exhaustively 
expressed,  since  in  the  same  proportion  in  which  com- 
modities are  equated  to  gold  they  are  equated  to  one  an- 
other. On  the  one  hand  the  universal  character  of  the 
labor-time  contained  in  them  is  revealed;  on  the  other, 
its  quantity  is  expressed  in  its  golden  equivalent.  The 
exchange  value  of  commodities  thus  expressed  in  the 
form  of  a  universal  equivalent  and,  moreover,  as  a 
numerical  proportion  of  this  equivalent,  in  terms  of  one 
specific  commodity,  or  represented  in  the  form  of  a  series 
of  commodities  equated  to  one  specific  commodity,  is 
PRICE.  Price  is  the  form  into  which  the  exchange  value 
of  commodities  is  converted  when  it  appears  within  the 
sphere  of  circulation. 

By  the  same  process  b}"^  which  commodities  express 
their  values  in  gold  prices,  they  turn  gold  into  a  measure 
of  value  i.  e.  into  money.  If  all  of  them  were  to  measure 
their  values  in  silver,  wheat,  or  copper,  and  therefore 
express  them  in  the  form  of  silver,  wheat  or  copper 
prices,  then  silver,  wheat  or  copper  would  be  measures  of 
value  and  consequently  universal  equivalents.  In  order 
to  appear  as  prices  in  circulation,  commodities  must  be 
exchange  values  before  they  enter  circulation.  Gold  be- 
comes the  measure  of  value  only  because  all  commodities 
estimate  their  exchange  value  in  it. 

The  universality  of  this  relation  which  is  the  result  of 
evolution  and  from  which  alone  springs  the  function  of 


—     77     — 

gold  08  the  measure  of  value,  implies  however,  that  every 
single  commodity  is  measured  in  gold,  in  proportion  to 
the  labor-time  contained  in  both;  that  the  actual  com- 
mon measure  of  the  commodity  and  of  gold  is  labor ;  or 
that  commodity  and  gold  are  passed  for  each  other  in 
direct  barter  as  equal  exchange  values.  How  this 
equalization  actually  takes  place,  can  not  be  discussed 
here  when  treating  of  simple  circulation.  So  much, 
however,  is  clear,  that  in  countries  producing  gold  and 
silver,  certain  quantities  of  labor-time  are  directly  em- 
bodied in  definite  quantities  of  gold  and  silver,  while  in 
countries  which  do  not  produce  gold  and  silver  the  same 
result  is  reached  in  a  round-about  way,  by  direct  or  in- 
direct exchange  of  the  commodities  of  those  countries; 
i.  e.  a  definite  portion  of  average  national  labor  is  given 
for  a  definite  quantity  of  labor-time,  embodied  in  the  gold 
and  silver  of  the  mine-owning  countries.  In  order  to  be 
able  to  serve  as  a  measure  of  value,  gold  must  be  as  far 
as  possible  a  variable  value,  because  it  can  become  the 
equivalent  of  other  commodities  only  as  an  incarnation 
of  labor-time,  and  the  same  labor-time  is  realized  in 
unequal  volumes  of  use-values  with  the  change  in  the  pro- 
ductive power  of  concrete  labor.  In  estimating  all  com- 
modities in  gold  it  is  only  assumed  that  gold  represents 
a  given  quantity  of  labor  at  a  given  moment,  as  was  done 
when  the  exchange  value  of  any  commodity  was  ex- 
pressed in  terms  of  the  use-value  of  any  other  com- 
modity. As  for  the  variations  of  the  value  of  gold,  the 
law  of  exchange  value  formulated  above  holds  good  in 
its  case  as  well.  If  the  exchange  value  of  commodities 
remains  unchanged,  then  a  general  rise  in  their  gold 


78 


prices  is  possible  only  in  the  case  of  a  fall  in  the  ex- 
change value  of  gold.  If  the  exchange  value  of  gold  re- 
mains unchanged,  a  general  rise  of  gold  prices  is  pos- 
sible only  when  the  exchange  value  of  all  commodities 
rises.  The  reverse  is  true  in  case  of  a  general  fall  in  the 
prices  of  commodities.  If  the  value  of  an  ounce  of  gold 
falls  or  rises  in  consequence  of  a  change  in  the  labor-time 
required  for  its  production,  then  the  values  of  all  other 
commodities  fall  or  rise  to  an  equal  extent.  Thus,  the 
ounce  of  gold  represents  after  the  change,  as  it  did  be- 
fore, a  given  quantity  of  labor-time  with  regard  to  all 
commodities.  The  same  exchange  values  are  now  esti- 
mated in  greater  or  smaller  quantities  of  gold  than  be- 
fore, but  they  are  estimated  in  proportion  to  the  mag- 
nitude of  their  values,  and  consequently  retain  the  same 
proportion  to  each  other.  The  ratio  2  -r-  4  -f-  8  re- 
mains the  same  when  expressed  as  1  -r-  2  -f-4  or  as 
4  -V-  8  -f-  16.  The  change  in  the  quantity  of  gold  in 
which  exchange  values  are  estimated  with  a  variation  in 
the  value  of  gold,  interferes  as  little  with  the  function 
of  gold  as  a  measure  of  value,  as  the  fifteen  times  smaller 
value  of  silver  as  compared  with  that  of  gold  interferes 
with  the  performance  of  that  function  by  the  latter. 
Since  labor-time  is  the  common  measure  of  gold  and 
commodities,  and  since  gold  figures  as  the  measure  of 
value  only  in  so  far  as  all  commodities  are  measured  by 
it,  the  idea  that  money  makes  commodities  commen- 
surable, is  therefore  a  mere  fiction  of  the  process  of 
circulation.*    It  is  rather  the  commensurability  of  com- 

*  True,  Aristotle  sees  that  the  exchange  value  of  commodities 
underlies  their  prices :  "      'iri  ^  iAAayh  ^v  vpW  rh  yifiur^a  «Tr«»,  Sfikw 


—    79    — 

modities  as  incorporated  labor-time,  that  turns  gold  into 
money. 

Commodities  enter  the  process  of  exchange  in  the  con- 
crete form  of  use-values.  They  are  yet  to  be  turned 
into  the  real  universal  equivalent  through  their  aliena- 
tion. The  determination  of  their  prices  merely  amounts 
to  their  ideal  transformation  into  the  universal  equiv- 
alent, a  process  of  equation  to  gold  which  is  yet  to  be 
realized.  But  since  commodities  are,  in  their  prices, 
transformed  into  gold  only  in  imagination,  or  are  con- 
verted only  into  imaginary  gold,  and  since  their  money 
form  is  not  differentiated  as  yet  from  their  concrete 
selves,  it  follows  that  gold  has  also  been  turned  into 
money  only  in  imagination;  it  appears  so  far  but  as  a 
measure  of  value,  and  in  fact  definite  quantities  of  gold 
serve  merely  as  names  for  certain  quantities  of  labor- 
time.     The  form  in  which  gold  is  crystallized  in  money 

Jto^c'pci  yap  ovifv  ^  ci  xAZvai  irevrt  avri  oticta(,  ^  ocrov  ai  irivrt  ^Aivai.*"        It   IS 

clear  that  exchange  existed  before  coin.  For  it  does  not  make 
any  difference  whether  you  give  five  beds  for  a  house,  or  as 
much  money  as  five  beds  are  worth").  On  the  other  hand. 
since  commodities  acquire  only  in  price  the  form  of  exchange 
value  with  respect  to  one  another,  he  makes  them  commensur- 
able through  money.  **  Aib  8cr  wivra.  rtrt.tL^<r6ai'  ovn*  yap  at\  Srrat.  iX- 
Aayii,  ci  it  tovto,  K9iv*>vim..  To  jr;  vopLUTfia  ucnrtp  fiirpov  <rv;xfieTpa  votrjaav  iai^et, 
ovre  yip  iv  piJj  ownit  oAXaY^?  icotvwvia  V.  ovr'  aWayr}  iaonrro?  /atj  ovrqif  our'to-o- 

T,^,  ^i, .voT,?  <rvMM«Tpt'«.''  ("Therefore  all  has  to  be  appraised. 
In  that  way  excfiange  may  always  take  place,  and,  with 
it,  society  can  exist.  Coin,  like  measure,  makes  every- 
thing commensurable  and  equal,  for  without  exchange  there 
would  be  no  society,  without  equality  there  would  be  no 
exchange,  and  without  commensurability,  no  equality.") 
He  does  not  conceal  from  himself  that  these  different 
objects    measured    by    money    are    entirely    incommensurable 


—     80     — 

always  depends  upon  the  way  in  which  commodities  ex- 
press their  own  exchange  value  to  each  other. 

Commodities  now  confront  one  another  in  a  double 
capacity:  actually  as  use- values,  ideally  as  exchange 
values.  The  twofold  aspect  of  labor  contained  in  them 
is  reflected  in  their  mutual  relations;  the  special  con- 
crete labor  being  virtually  present  as  their  use-value, 
while  universal  abstract  labor-time  is  ideally  represented 
in  their  price  in  which  commodities  appear  as  com- 
mensurable embodiments  of  the  same  value — substance 
differing  merely  in  quantity. 

The  difference  between  exchange  value  and  price  ap- 
pears to  be  merely  nominal  or,  as  Adam  Smith  says, 
labor  is  the  real  price,  and  money  the  nominal  price  of 
commodities.  Instead  of  estimating  the  value  of  one 
quarter  of  wheat  in  thirty  days  of  labor,  it  is  estimated 
in  one  ounce  of  gold  if  one  ounce  of  gold  is  the  product 
of  thirty  days'  labor.  However,  far  from  this  difference 
being  merely  nominal,  all  the  storms  which  threaten 
commodities  in  the  actual  process  of  circulation  center 
about  it.     Thirty  days  of  labor  are  contained  in  a  quarter 


quantities.  What  he  is  after  is  the  common  unit  of  commodities 
as  exchange  values,  which  as  an  ancient  Greek  he  was  unable 
to  find.  He  gets  out  of  the  difficulty  by  making  commensurable 
through  money  what  is  in  itself  incommensurable,  so  far  as  it 

is  necessary  for  practical  purposes,  "t^ /*«»' oSk  akrj«ti<f  iivrarov  rk  ro- 

vovTov  ita4»ipovra  vvftfterpa    ytvetrSat.^  irpo;   Si  rriv    xptiav  ivS4\tTtu,    iKavut^." 

( "In  truth  it  is  impossible  to  make  things  that  are  so  different, 
commensurable,  but  for  practical  purposes  it  is  permissible.") 
Aristotle,  Ethica  Nicomacbea,  1.  5,  c.  8,  edit.  Bekkeri,  Oxonii, 
1837. 


—    81     '-' 

of  wheat  and  it  need  not,  therefore^  be  expressed  in  terms 
of  labor-time.  But  gold  is  a  commodity  distinct  from 
wheat,  and  only  in  circulation  it  can  be  ascertained, 
whether  the  quarter  of  wheat  can  be  actually  turned 
into  an  ounce  of  gold  as  is  anticipated  in  its  price. 
That  will  depend  on  whether  or  not  it  proves  to  be  a  use- 
value,  whether  or  not  the  quantity  of  labor-time  con- 
tained in  it  is  the  quantity  necessarily  required  by 
society  for  the  production  of  a  quarter  of  wheat.  The 
commodity  as  such  is  an  exchange  value,  it  has  a  price. 
In  this  difference  between  exchange  value  and  price  lies 
the  demonstration  of  the  fact  that  the  particular  in- 
dividual labor  contained  in  a  commodity  has  first  to  be 
expressed  through  the  process  of  alienation  in  terms  of 
its  counterpart,  i.  e.  as  impersonal,  abstract,  universal 
and,  only  in  that  form,  social  labor,  viz.  money.  Whether 
it  can  be  so  expressed  seems  to  be  a  matter  of  chance. 
Thus,  although  the  exchange  value  of  a  commodity  finds 
only  ideally  a  distinct  expression  in  price,  and  the  two- 
fold character  of  labor  contained  in  the  commodity  ex- 
ists as  yet  merely  as  two  distinct  forms  of  expression, 
and,  although  in  consequence  thereof,  the  embodiment  of 
universal  labor-time,  gold,  confronts  actual  commodi- 
ties only  as  an  imaginary  measure  of  value,  yet  the  fact 
that  exchange  value  exists  as  price,  or  that  gold  exists  as 
a  measure  of  value  implies  the  necessity  of  the  aliena- 
tion of  commodities  for  hard  cash  and  the  possibility 
of  their  non-alienation.  In  short,  here  lies  latent  the 
entire  contradiction  which  is  inherent  in  the  fact  that 
products  are  commodities  or  that  the  particular  work  of 
a  private  individual  can  be  of  no  account  in  society 


—     82     — 

until  it  has  taken  the  very  opposite  form  of  abstract  uni- 
versal labor.  For  that  reason,  the  Utopians,  who  want 
to  have  commodities  but  not  money,  who  want  a  system 
of  production  based  on  private  exchange  without  the 
necessary  conditions  underlying  such  a  system,  are  con- 
sistent when  they  "destroy"  money  not  in  its  tangible 
form  but  in  its  nebulous  illusory  form  of  a  measure  of 
value.  Under  the  invisible  measure  of  value  there  lurks 
the  hard  cash. 

The  process  by  which  gold  has  become  the  measure 
of  value  and  exchange  value  has  been  turned  into  price, 
being  once  assumed,  all  commodities  express  in  their 
prices  but  imagined  quantities  of  gold  of  various  mag- 
nitudes. As  such  various  quantities  of  the  same  thing, 
gold,  they  are  equated,  compared  and  measured  with 
each  other,  and  thus  arises  the  technical  necessity  of 
referring  them  to  a  definite  quantity  of  gold  as  a  unit 
of  measure,  a  unit  which  develops  into  a  standard 
measure  by  virtue  of  its  divisibility  into  aliquot  parts, 
which  in  their  turn  can  be  sub-divided  into  aliquot  parts.' 
But  quantities  of  gold  as  such  are  measured  by  weight. 


^The  peculiar  circumstance  that,  while  the  ounce  of  gold 
serves  in  England  as  the  unit  of  the  standard  of  money,  it  is 
not  divided  into  aliquot  parts  has  been  explained  as  follows: 
"Our  coinage  was  originally  adapted  to  the  employment  of 
silver  only — hence  an  ounce  of  silver  can  always  be  divided 
into  a  certain  adequate  number  of  pieces  of  coin;  but  as  gold 
was  introduced  at  a  later  period  into  a  coinage  adapted  only 
to  silver,  an  ounce  of  gold  cannot  be  coined  into  an  adequate 
number  of  pieces."  Maclaren :  "A  Sketch  of  the  History  of  the 
Currency,"  p.  IC,  London,  1858. 


83 


The  standard  of  measure  is  thus  found  ready  in  the  gen- 
eral measures  of  weight  of  metals  and,  therefore,  where- 
ever  metallic  circulation  is  in  vogue,  these  measures  serve 
originally  as  standards  of  price.  Since  commodities  no 
more  relate  to  each  other  as  exchange  values  to  be 
measured  by  labor-time,  but  as  magnitudes  of  the  same 
denomination  measured  in  gold,  the  latter  is  transformed 
from  a  measure  of  value  into  a  standard  of  price.  The 
comparison  of  prices  with  each  other  as  different  quanti- 
ties of  gold  is  thus  crystallized  in  figures  which  corre- 
spond to  an  assumed  quantity  of  gold  and  represent  it 
as  a  standard  of  aliquot  parts.  Gold  as  measure  of  value 
and  as  standard  of  price  has  entirely  different  forms 
of  manifestation  and  the  confusing  of  the  two  has 
resulted  in  the  wildest  of  theories.  Gold  is  a 
measure  of  value  as  incorporated  labor-time;  it 
is  the  standard  of  price  as  a  certain  weight  of 
metal.  Gold  becomes  the  measure  of  value  by 
virtue  of  its  relation  as  exchange  value  to  commodities 
as  exchange  values ;  as  standard  of  price,  a  definite  quan- 
tity of  gold  serves  as  a  unit  for  other  quantities  of  gold. 
Gold  is  the  measure  of  value,  because  its  value  is  variable ; 
it  is  the  standard  of  price,  because  it  is  fixed  as  a  constant 
unit  of  weight.  In  this  case,  as  in  all  cases  of  measur- 
ing quantities  of  the  same  denomination,  the  establish- 
ment of  a  definite  and  unvarying  unit  of  measure  is  all- 
important.  The  necessity  of  settling  upon  a  quantity 
of  gold  as  a  unit  of  measure  and  upon  its  aliquot  parts 
as  subdivisions  of  that  unit,  has  given  rise  to  the  notion 
that  a  certain  quantity  of  gold  which  has  naturally  a 
variable  value  had  been  assismed  a  fixed  ratio  of  value 


—     84    — 

to  the  exchange  values  of  all  commodities;  the  fact  is 
overlooked  that  exchange  values  of  commodities  are 
transformed  into  prices,  i.  e.  into  quantities  of  gold,  be- 
fore gold  develops  as  a  standard  of  price.  No  matter 
how  the  value  of  gold  may  vary,  the  ratios  between  the 
values  of  different  quantities  of  gold  remain  constant. 
Let  the  fall  in  the  value  of  gold  amount  to  1000  per  cent., 
still  twelve  ounces  of  gold  will  have  a  twelve  times 
greater  value  than  one  ounce  of  gold ;  and  in  prices  the 
only  thing  considered  is  the  ratio  between  different  quan- 
tities of  gold.  Since,  on  the  other  hand,  no  rise  or  fall 
in  the  value  of  an  ounce  of  gold  can  alter  its  weight,  no 
alteration  can  take  place  in  the  weight  of  its  aliquot 
parts.  Thus  gold  always  renders  the  same  service  as  an 
invariable  standard  of  price,  no  matter  how  much  its 
value  may  vary.* 

An  historical  process  which,  as  we  shall  explain  later, 
was  determined  by  the  nature  of  metallic  circulation,  led 
to  the  result  that  the  same  denomination  of  weight  was 

'  "Money  may  continually  vary  in  value  and  yet  be  as  good  a 
measure  of  value  as  if  it  remained  perfectly  stationary.  Suppose, 
for  instance,  it  is  reduced  in  value.  .  .  .  Before  the  reduction, 
a  guinea  would  purchase  three  bushels  of  wheat  or  6  days' 
labour ;  subsequently  it  would  purchase  only  2  bushels  of  wheat, 
or  4  days*  labour.  In  both  cases,  the  relations  of  wheat  and 
labour  to  money  being  given,  their  mutual  relations  can  be 
inferred;  in  other  words,  we  can  ascertain  that  a  bushel  of 
wheat  is  worth  2  days*  labour.  This,  which  is  all  that  meas- 
uring value  implies,  is  as  readily  done  after  the  reduction  as 
Itefore.  The  excellence  of  a  thing  as  a  measure  of  value  is 
altogether  independent  of  its  own  variableness  in  value**  (p.  11, 
Bailey,  **Money  and  its  Vicissitudes,**  London,  1837). 


85 


retained  for  a  constantly  changing  and  decreasiixg 
weight  of  precious  metals  in  their  function  of  a  stand- 
ard of  price.  Thus  the  English  pound  sterling  denotes 
less  than  one-third  of  its  original  weight;  the  pound 
Scot,  before  the  Union,  only  1-36 ;  the  French  livre,  1-74 ; 
the  Spanish  Maravedi,  less  than  1-1000 ;  the  Portuguese 
Rei,  a  still  smaller  fraction.  Such  was  the  historical 
origin  of  the  discrepancy  between  the  current  money 
names  of  various  weights  of  metals  and  their  weight 
denominations.*  Since  the  determination  of  the  unit  of 
measure,  of  its  aliquot  parts,  and  of  their  names  is 
purely  conventional,  and  since  they  should  possess  within 
the  sphere  of  circulation  the  character  of  universality 
and  compulsion,  they  had  to  be  settled  hy  law.  The 
purely  formal  operation  thus  devolved  upon  the  govem- 
ment.2  The  metal  which  was  to  serve  as  the  money  ma- 

^  "Le  monete  lequali  oggi  sono  ideali  sono  le  piu  antiche 
d'ogni  nazione,  e  tutte  furono  un  tempo  reali  (the  latter  aa- 
eertion  is  too  sweeping),  e  perchfe  erano  reali  con  esse  si  eon- 
tava."  Galiani,  "Delia  Moneta,"  1.  e.,  p.  153  ("Coins  which 
are  ideal  to-day  [i.  e.,  whose  names  no  longer  correspond  to 
their  value]  are  among  the  more  ancient  with  every  nation; 
at  one  time  they  were  all  real,  and  for  that  reason  served  for 
the  purpose  of  counting.") 

'  The  romantic  A.  Miiller  says :  "According  to  our  idea  every 
independent  sovereign  has  the  right  to  name  the  metal  money, 
and  to  give  it  a  nominal  social  value,  rank,  standing  and  title 
(p.  276,  V.  II.,  A.  H.  Miiller,  "Die  Elemente  der  Staatskunst," 
Berlin,  1809).  As  far  as  title  is  concerned  the  Hon.  Hofrath 
is  right;  but  he  forgets  the  substance.  How  confused  hia 
"ideas"  were,  may  be  seen,  e.  g.,  from  the  following  passage: 
"Everybody   understands  how   much  depends   upon  the   right 


—     86     — 

terial,  was  found  already  adopted  in  the  community.  In 
different  countries  the  legal  standard  of  price  is  natur- 
ally different.  In  England  e.  g.  the  ounce  as  a  weight 
of  metal  is  divided  into  pennyweights,  grains  and  carats 
Troy,  but  the  oimce  of  gold  as  the  unit  of  money  is  di- 
vided into  3  7-8  sovereigns,  the  sovereign  into  20  shill- 
ings, the  shilling  into  12  pence,  so  that  100  pounds  of  22 
carat  gold  (1200  ounces)   =  4672  sovereigns  and  10 

determination  of  the  mint-price,  especially  in  a  country  like 
England,  where  the  government  with  magnificent  Uberality 
coins  money  gratuitously  (Herr  Mtiller  seems  to  think  that 
the  members  of  the  English  government  defray  the  mint  ex- 
penses out  of  their  own  pockets ) ,  where  it  does  not  charge  any 
mintage,  etc.,  and  thus  if  the  mint-price  of  gold  were  set  con- 
siderably above  its  market  price,  if  instead  of  paying  as  now 
£3  17s.  lOVgd.  per  1  oz.  of  gold,  it  would  set  the  price  of  an 
ounce  of  gold  at  £3  19s.,  all  money  would  flow  into  the  mint 
and  exchanging  for  the  silver  contained  there  bring  it  into  the 
market  to  be  exchanged  there  for  the  cheaper  gold;  the  latter 
would  in  the  same  manner  be  brought  again  to  the  mint  and 
the  entire  coinage  system  would  be  upset"  (1.  c,  p.  280-281). 
To  preserve  order  in  English  coinage,  Miiller  falls  back  on 
"disorder.**  While  shilling  and  pence  arc  mere  names  of  cer- 
tain parts  of  an  ounce  of  gold  represented  by  signs  of  silver 
and  copper,  he  imagines  that  an  ounce  of  gold  is  estimated  in 
gold,  silver  and  copper  and  thus  confers  upon  the  Englishmen 
the  blessing  of  a  triple  standard  of  value.  Silver  as  a  measure 
of  money,  next  to  gold,  was  formally  abolished  only  in  1816 
by  56  George  III.,  c.  68.  As  a  matter  of  fact,  it  was  legally 
abolished  as  early  as  1734  by  14  George  II.,  c.  42,  and  still 
earlier  by  actual  practice.  There  were  two  circumstances  that 
made  A.  Mtiller  capable  of  a  so-called  higher  conception  of 
political  economy :  first,  his  wide  ignorance  of  economic  facta ; 
second,  his  dilettanti-like  visionary  attitude  toward  philosophy. 


shillings.  In  the  world  market,  however,  where  national 
boundaries  disappear,  these  national  characteristics  of 
the  measure  of  money  also  disappear  and  give  place  to 
the  general  measures  of  weight  of  metals. 

The  price  of  a  commodity  or  the  quantity  of  gold  into 
which  it  is  ideally  transformed,  is,  therefore,  now  ex- 
pressed in  the  names  of  coins  of  the  gold  standard.  Thus, 
instead  of  saying :  a  quarter  of  wheat  is  worth  an  ounce 
of  gold,  it  is  said  in  England  to  be  worth  3  £  17s.  10  ^d. 
All  prices  are  thus  expressed  in  the  same  denominations. 
The  peculiar  form  which  commodities  lend  to  their 
exchange  values  is  transformed  into  a  money-denomina- 
tion by  which  commodities  tell  each  other  how  much  they 
are  worth.  Money  in  its  turn  becomes  money  of  ac- 
count.^ 

We  transform  commodities  into  money  of  account, 
in  our  mind,  on  paper,  in  conversation,  whenever  it  is 
a  question  of  expressing  any  kind  of  wealth  in  terms  of 
exchange  value.'  For  that  transformation  we  need  the 
gold  substance,  but  only  in  imagination.  In  order  to 
estimate  the  value  of  a  thousand  bales  of  cotton  in  a 


el»e  npoi  to  opte^ery."  { Athen.  Deipn.  1.  IV.  49.  V.  2,  ed.  Schweig- 
hfiuser,  1802.)  (When  Anacharsis  was  asked  for  what  purpose 
the  Greeks  used  money,  he  replied,  "For  reckoning.") 

*G.  Gamier,  one  of  the  early  French  translators  of  Adam 
Smith,  conceived  the  queer  notion  of  fixing  a  proportion  between 
the  use  of  mcmey  of  account  and  that  of  actual  money.  His 
proportion  is  10  to  1.  (G.  Gamier,  "Histoire  de  la  Monnaie 
depuis  les  temps  de  la  plus  haute  antiquity,"  etc.,  t.  1,  p.  78.) 


—     88     — 

certain  number  of  ounces  of  gold  and  then  to  express 
this  number  of  ounces  in  the  denominations  of  the 
ounce,  £.  s.  d.,  not  a  single  atom  of  gold  is  required. 
Thus,  not  a  single  ounce  of  gold  was  in  circulation  in 
Scotland  before  Robert  Peel's  Bank  Act  of  1845,  al- 
though the  gold  ounce,  expressed  in  its  English  standard 
of  account,  3£  17s.  lOJ/^d.,  served  as  the  legal  standard 
of  price.  In  a  similar  manner  silver  serves  as  standard 
of  price  in  the  trade  between  Siberia  and  China,  although 
that  trade  virtually  amounts  to  barter.  It  is,  therefore, 
immaterial  to  money,  as  money  of  account,  whether  or 
not  its  entire  unit  of  measure  or  the  fractions  thereof 
are  really  coined.  In  England,  at  the  time  of  Wil- 
(liam  the  Conqueror,  1£,  then  a  pound  of  pure 
silver,  and  the  shilling,  1-20  of  a  pound,  existed 
only  as  money  of  account,  while  the  penny,  1-240 
of  a  pound  of  silver,  was  the  largest  silver  coin  in  (ex- 
istence. On  the  other  hand,  there  are  no  shillings 
and  pence  in  England  to-day,  although  they  are  legal 
denominations  for  certain  parts  of  an  ounce  of  gold. 
Money  as  money  of  account  may  exist  exclusively  in 
idea,  while  the  money  in  actual  existence  may  be  coined 
according  to  an  entirely  different  standard.  Thus  the 
money  in  circulation  in  many  English  colonies  of  North 
America  consisted  until  late  in  the  eighteenth  century 
of  Spanish  and  Portuguese  coins,  although  the  money 
of  account  was  throughout  the  same  as  in  England.^ 


'The  act  of  Maryland  in  1723  by  which  tobacco  was  made 
the  l^al  standard,  but  its  value  reduced  to  terms  of  English 
gold  money,  namely  one  penny  equal  to  one  pound  of  tobacco. 


—    89    — 

Owing  to  the  fact  that  money,  when  serving  as  the 
standard  of  price,  appears  under  the  same  reckoning 
names  as  do  the  prices  of  commodities,  and  that,  there- 
fore, the  sum  of  3£  17s.  lO^^d.  may  signify,  on  the 
one  hand,  an  ounce  weight  of  gold,  and  on  the  other, 
the  value  of  a  ton  of  iron,  this  reckoning  name  of  money 
has  been  called  its  mint-price.  Hence,  there  sprang  up 
the  extraordinary  notion  that  the  value  of  gold  is  esti- 
mated in  its  own  material,  and  that,  in  contradistinction 
to  all  other  commodities,  its  price  is  fixed  by  the  State. 
It  was  erroneously  thought  that  the  giving  of  reckon- 
ning  names  to  definite  weights  of  gold  is  the  same  thing 
as  fixing  the  value  of  those  weights.*  In  so  far  as  gold 
serves  as  one  of  the  elements  in  determining  price,  i.  e., 
where  it  performs  the  function  of  money  of  account,  it 
not  only  has  no  fixed  price,  but  has  no  price  whatever. 
In  order  to  have  a  price,  i.  e.,  in  order  to  express  itself 
in  a  specific  commodity  as  a  universal  equivalent  that 
other  commodity  would  have  to  play  the  same  exclusive 


reminds  of  the  "leges  barbarorum,"  in  which,  inversely,  certain 
sums  of  money  were  expressed  in  terms  of  oxen,  cows,  etc.  In 
that  case  neither  gold  nor  silver,  but  the  ox  and  the  cow  were 
the  actual  material  of  the  money  of  accoimt, 

*  Thus,  we  read,  e.  g.,  in  the  "Familiar  Words"  of  Mr.  David 
Urquhart:  "The  value  of  gold  is  to  be  measured  by  itself; 
how  can  any  substance  be  the  measure  of  its  own  worth  in 
other  things?  The  worth  of  gold  is  to  be  established  by  its 
own  weight,  under  a  false  denomination  of  that  weight — ^and 
an  ounce  is  to  be  worth  so  many  pounds  and  fractions  of 
pounds.  This  is  falsifying  a  measure,  not  establishing  a 
standard." 


—    90    — 

role  in  the  process  of  circulation  as  gold.    But  two  com- 
modities excluding  all  other  commodities  mutually  ex- 
clude each  other.     Therefore,  wherever  gold  and  silver 
have  by  law  been  made  to  perform  side  by  side  the  func- 
tion of  money  or  of  a  measure  of  value  it  has  always  been 
tried,  but  in  vain,  to  treat  them  as  one  and  the  same  ma- 
terial. To  assume  that  there  is  an  invariable  ratio  between 
the  quantities  of  gold  and  silver  in  which  a  given  quantity 
of  labor-time  is  incorporated,  is  to  assume,  in  fact,  that 
gold  and  silver  are  of  one  and  the  same  material,  and 
that  a  given  mass  of  the  less  valuable  metal,  silver,  is  a 
constant  fraction  of  a  given  mass  of  gold.     From  the 
reign  of  Edward  III  to  the  time  of  George  II,  the  his- 
tory of  money  in  England  consists  of  one  long  series  of 
perturbations  caused  by  the  clashing  of  the  legally  fixed 
ratio  between  the  values  of  gold  and  silver,  with  the 
fluctuations  in  their  real  values.    At  one  time  gold  was 
too  high ;  at  another,  silver.    The  metal  that  for  the  time 
being  was  estimated  below  its  value  was  withdrawn  from 
circulation,  melted  and  exported.    The  ratio  between  the 
two  metals  was  then  again  altered  by  law,  but  the  new 
nominal  ratio  soon  came  into  conflict  again  with  the 
real  one.     In  our  own  times,  the  slight  and  transient 
fall  in  the  value  of  gold  compared  with  silver,  which 
was   a  consequence   of   the   Indo-Chinese   demand   for 
silver,  produced  on  a  far  more  extended  scale  in  France 
the  same  phenomena,  export  of  silver,  and  its  expul- 
sion from  circulation  by  gold.     During  the  years  1855, 
1856  and  1857,  the  excess  in  France  of  gold  imports 
over  gold  exports  amounted  to  £41,580,000,  while  the 
excess  of  silver  exports  over  silver  imports  was  £14,- 


—    91    — 

704,000.  In  fact,  in  tnose  countries  in  which  both 
metals  are  legally  measures  of  value,  and  therefore  both 
legal  tender,  so  that  every  one  has  the  option  of  paying 
in  either  metal,  the  metal  that  rises  in  value  is  at  a 
premium,  and,  like  every  other  commodity,  measures 
its  price  in  the  over-estimated  metal  which  alone  serves 
in  reality  as  the  standard  of  value.  The  result  of  ail 
experience  and  history  with  regard  to  this  question  is 
simply  that,  where  two  commodities  perform  by  law 
the  functions  of  a  measure  of  value,  in  practice  one 
alone  maintains  that  position.^ 

B.  THEORIES  OF  THE  UNIT  OF  MEASURE  OF 
MONEY. 

The  circumstance  that  commodities  are  converted 
into  gold  only  in  ideas  as  prices  and  that  gold  is  there- 
fore turned  into  money  only  in  idea,  gave  rise  to  the 
theory  of  the  ideal  unit  of  measure  of  money.  Since, 
in  the  determination  of  prices,  gold  and  silver  serve 
only  ideally  as  money  of  account,  it  was  asserted 
that  the  names  pound,  shilling,  pence,  thaler,  franc, 
etc.,  instead  of  denoting  certain  weights  of  gold 
and  silver  or  labor  incorporated  in  some  way,  stood 
rather    for   ideal   atoms   of   value.      Thus,    if,    e.    g., 

*  "Money  is  the  measure  of  Commerce,  and  of  the  rate  of 
everything,  and  therefore  ought  to  be  kept  (as  all  other  meas- 
ures) as  steady  and  invariable  as  may  be.  But  this  cannot  be, 
if  your  money  be  made  of  two  Metals,  whose  proportion 
.  ,  .  constantly  varies  in  respect  of  one  another."  John 
Locks:  Some  Considerations  on  the  Lowering  of  Interest,  etc, 
1691  (p.  166,  p.  65  in  his  Works  7  ed.,  London,  1768,  vol.  HL 


—     92     — 

the  value  of  an  ounce  of  silver  should  rise  it  would  con- 
tain more  such  atoms  and  would  therefore  have  to  be 
estimated  and  coined  in  a  greater  number  of  shillings. 
This  doctrine,  revived  again  during  the  last  commercial 
crisis  in  England  and  even  voiced  in  Parliament  in  two 
separate  reports  attached  to  the  report  of  the  select 
Committee  on  the  Bank  Acts  sitting  in  July,  1858,  dates 
from  the  end  of  the  seventeenth  century. 

At  the  time  of  the  accession  of  William  III.,  the  Eng- 
lish mint-price  of  an  ounce  of  silver  was  5s.  2d.,  or  1-62 
of  an  ounce  of  silver  was  equal  to  a  penny ;  12  of  these 
pence  were  called  a  shilling.  According  to  that  stand- 
ard, a  piece  of  silver  weighing,  say,  6  ounces,  would  be 
coined  into  thirty-one  coins,  each  called  a  shilling.  But 
the  market  price  of  an  ounce  of  silver  rose  above  its 
mint  price,  from  5s.  2d.  to  6s.  3d.,  or,  in  order  to  buy 
an  ounce  of  silver  bullion  6s.  3d.  had  to  be  paid.  How 
could  the  market  price  of  an  ounce  of  silver  rise  above 
its  mint  price,  when  the  mint  price  is  merely  a  reckon- 
ing name  for  aliquot  parts  of  an  ounce  of  silver?  The 
riddle  was  easily  solved.  Out  of  £5,600,000  of  silver 
money  which  was  in  circulation  at  that  time,  four  mil- 
lions were  worn  out,  clipped  and  debased.  A  trial  dis- 
closed that  £57,000  of  silver  which  were  supposed  to 
weigh  220,000  ounces,  weighed  only  141,000  ounces. 
The  mint  went  on  coining  according  to  the  same  stand- 
ard, but  light-weighted  shillings  in  actual  circulation 
represented  smaller  parts  of  an  ounce  than  their  name 
implied.  Hence,  a  greater  quantity  of  these  light- 
weighted  shillings  had  to  be  paid  in  the  market  for  an 
ounce  of  silver  bullion.    When  a  general  recoinage  was 


—     93     — 

decided  upon  in  consequence  of  the  derangement  that  had 
been  produced,  LOWNDES,  the  Secretary  of  the  Treas- 
ury, declared  that  the  value  of  an  ounce  of  silver  had 
risen  and  therefore  it  must  henceforth  be  coined  into 
6s.  3d.  instead  of  into  5s.  2d.  as  heretofore.  His  argu- 
ment practically  amounted  to  the  assertion  that  the  rise 
in  the  value  of  the  ounce  caused  a  fall  in  the  value  of  its 
aliquot  parts.  His  false  theory,  however,  served  merely 
as  an  embellishment  for  a  just,  practical  purpose.  The 
government  debts  were  contracted  in  light  shillings, 
were  they  to  be  paid  in  heavy  ones  ?  Instead  of  saying 
pay  back  four  ounces  of  silver,  when  you  had  received 
nominally  five  ounces  but  virtually  only  four,  he  said 
pay  back  nominally  five  ounces  but  reduce  the  metallic 
contents  to  four  ounces  and  call  a  shilling  what  you 
had  called  four-fifths  of  a  shilling  heretofore.  Thus 
Lowndes  practically  adhered  to  the  metallic  weight 
while  theoretically  he  clung  to  the  reckoning  name. 
His  adversaries  who  clung  only  to  the  name  and  there- 
fore declared  the  25  to  50  per  cent,  lighter  shillfug  to 
be  identical  with  the  full-weight  shilling  maintained 
on  the  contrary  that  they  adhered  to  the  metallic  weight. 
JOHN  LOCKE,  who  was  an  advocate  of  the  new  bour- 
geoisie in  all  forms,  the  manufacturers  against  the 
working  classes  and  paupers,  the  commercial  class 
against  the  old  fashioned  usurers,  the  financial  aris- 
tocracy against  the  state  debtors,  and  who  went  so  far 
as  to  prove  in  his  own  work  that  the  bourgeois  reason  is 
the  normal  human  reason,  also  took  up  the  challenge 
against  Lowndes.  John  Locke  carried  the  day  and 
money  borrowed  at  ten  or  fourteen  shillings  to  a  guinea 


—     94    — 

was  repaid  in  guineas  of  twenty  shillings.^  SIR  JAMES 
STEUART  sums  up  the  entire  transaction  as  follows: 
**  .  .  .  the  state  gained  considerably  upon  the  score 
of  taxes,  as  well  as  the  creditors  upon  their  capitals  and 
interest;  and  the  nation,  which  was  the  principal  loser, 
was  pleased;  because  their  standard  (The  standard  of 


*(Locke  says  among  other  things:  "  .  *  .  call  that  a 
Crown  now,  which  before  .  .  .  was  but  a  part  of  a  Grown 
...  An  equal  quantity  of  Silver  is  always  the  same  Value 
with  an  equal  quantity  of  Silver.  .  .  .  For  if  the  abating 
1-20  of  the  quantity  of  Silver  of  any  Coin  does  not  lessen  its 
Value,  the  aibating  19-20  of  the  quantity  of  the  Silver  of  any 
Coin  will  not  abate  its  Value.  And  so  a  single  Penny,  being 
called  a  Crown,  will  buy  as  much  Spice,  or  Silk,  or  any  other 
Commodity,  as  a  Crown-Piece,  which  contains  20  times  as 
much  Silver.  .  .  .  Now  [all  that  may  be  done]  is  giving  a 
less  quantity  of  Silver  the  Stamp  and  Denomination  of  a  great- 
er. ..  .  But  'tis  Silver  and  not  Names  that  pay  Debts 
and  purchase  Commodities"  (1.  c,  p.  135-145  passim).  If  to 
laise  the  value  of  money  means  nothing  but  to  give  any  de- 
sired name  to  an  aliquot  part  of  a  silver  coin,  e.  g.,  to  call  an 
eighth  part  of  an  ounce  of  silver  a  penny,  then  money  may 
really  be  rated  as  high  as  you  please.  At  the  same  time,  Locke 
answered  Lowndes  that  the  rise  of  the  market  price  above  the 
mint  price  was  due  not  to  the  rise  of  the  value  of  silver,  but 
to  the  lighter  silver  coins.  Seventy-seven  clipped  shillings  do 
not  weigh  a  particle  more  than  62  full -weighted  ones.  Finally 
he  pointed  out  with  perfect  right  that,  aside  from  the  loss  of 
weight  in  the  circulating  coin,  the  market  price  of  silver  bul- 
lion in  England  could  rise  to  some  extent  above  its  mint  price, 
since  the  export  of  silver  bullion  was  allowed  while  that  of 
silver  coin  was  prohibited  (1.  c,  p.  54-116  passim).  Locke  was 
exceedingly  careful  not  to  touch  upon  the  burning  question 
of  public  deibts,  and  no  less  carefully  avoided  the  discussion  of 


—    95    — 

their  own  value)  was  not  debased.*'*  Steuart  thought 
that  the  nation  would  prove  more  alert  with  the  further 
development  of  commerce.  He  was  mistaken.  About 
120  years  later  the  same  quid  pro  quo  was  repeated. 

It  was  just  in  the  order  of  things  that  Bishop  BERKE- 
LEY, the  representative  of  a  mystical  idealism  in  Eng- 
lish philosophy,  should  have  given  a  theoretical  turn  to 
the  doctrine  of  the  ideal  unit  of  measure  of  money,  some- 
thing which  the  practical  "Secretary  to  the  Treasury" 
had  failed  to  do.  He  asks :  ^'Whether  the  terms  Crown, 
Livre,  Pound  Sterling,  etc.,  are  not  to  be  considered 
as  Exponents  or  Denominations  of  such  Proportion? 
[namely  proportions  of  abstract  value  as  such.]  And 
whether  Gold,  Silver,  and  Paper  are  not  Tickets  or  Count- 
ers for  Reckoning,  Recording  and  Transferring  thereof  ? 
(of  the  proportion  of  value).  Whether  Power  to  com- 
mand the  Industry  of  others  be  not  real  Wealth?  And 
whether  Money  be  not  in  Truth,  Tickets  or  Tokens  for 
conveying  and  recording  such  Power,  and  whether  it  be 
of  great  consequence  what  Materials  the  Tickets  are  made 
of  ?"2  Here  we  find  a  confusion,  first  of  the  measure  of 

the  delicate  economic  question,  viz.,  the  depreciation  of  the 
currency  out  of  proportion  to  its  real  loss  of  silver,  as  was 
shown  by  the  rate  of  exchange  and  the  ratio  of  silver  bullion 
to  silver  coin.  We  shall  return  to  this  question  in  its  general 
form  in  the  chapter  on  the  Medium  of  Circulation.  Nicholas 
Barbon  in  "A  Discourse  Concerning  Coining  the  New  Money 
Lighter,  in  Answer  to  Mr.  Locke's  Considerations,  etc.,"  Lon- 
don, 1696,  tried  in  vain  to  entice  Locke  to  difficult  ground. 

» Steuart,  1.  c,  v.  IL,  p.  154. 

*  The  Querist,  1.  c,  (p.  5-6-7.)  The  "Queries  on  Money"  are 
generally  clever.     Among  other  things  Berkeley  is  perfectly 


—     96     — 

value  and  the  standard  of  price,  and  secondly  of  gold 
and  silver  as  measures  on  the  one  hand  and  mediums 
of  circulation  on  the  other.  Because  precious  metals 
can  be  replaced  by  tokens  in  the  process  of  circulation 
Berkeley  comes  to  the  conclusion  that  these  tokens  rep- 
resent nothing,  i.  e.,  only  the  abstract  idea  of  value. 

SIR  JAMES  STEUAET  had  so  fully  developed  the 
theory  of  the  ideal  unit  of  measure  of  money,  that  his 
successors — unconscious  successors  since  they  do  not 
know  him — ^have  added  to  it  neither  a  new  version 
nor  even  a  new  example.  "Money,  which  I  call 
of  account,  is  no  more  than  an  arbitrary  scale  of 
equal  parts,  invented  for  measuring  the  respective 
value  of  things  vendible.  Money  of  account,  there- 
fore, is  quite  a  different  thing  from  money  coin, 
which  is  price*  and  might  exist,  although  there  was 
no  such  thing  in  the  world  as  any  substance  which  could 
become  an  adequate  and  proportional  equivalent,  for 
every  commodity.  .  .  .  Money  of  account  .  .  . 
performs  the  same  office  with  regard  to  the  value  of 
things,  that  degrees,  minutes,  seconds,  etc.,  do  with 
regard  to  angles,  or  as  scales  do  to  geographical  maps, 
or  to  plans  of  any  kind.  In  all  these  inventions,  there 
is  constantly  some  denomination  taken  for  the  unit. 

right  in  saying  that  by  their  progress  the  North  American 
colonies  "make  it  plain  as  daylight,  that  gold  and  silver  are  not 
so  necessary  for  the  wealth  of  a  nation,  as  the  vulgar  of  all 
ranks  imagine." 

*  Price  means  here  real  equivalent  in  the  sense  commonly 
employed  by  English  economic  writers  in  the  seventeenth  cen* 
tuiy. 


—     97     — 

,  .  .  The  usefulness  of  all  those  inventions  being 
solely  confined  to  the  marking  of  proportion.  Just  so 
the  unit  in  money  can  have  no  invariable  determinate 
proportion  to  any  part  of  value,  that  is  to  say,  it  cannot 
be  fixed  to  any  particular  quantity  of  gold,  silver,  or  any 
other  commodity  whatsoever.  The  unit  once  fixed,  we 
can,  by  multiplying  it,  ascend  to  the  greatest  value. 
.  .  .  The  value  of  commodities,  therefore,  depending 
upon  a  general  combination  of  circumstances  relative 
to  themselves  and  to  the  fancies  of  men,  their  value 
ought  to  be  considered  as  changing  only  with  respect  to 
one  another;  consequently,  anything  which  troubles  or 
perplexes  the  ascertaining  those  changes  of  proportion 
by  the  means  of  a  general,  determinate  and  invariable 
scale,  must  be  hurtful  to  trade.  .  .  Money  .  .  . 
is  an  ideal  scale  of  equal  parts.  If  it  be  demanded  what 
ought  to  be  the  standard  value  of  one  part?  I  answer 
by  putting  another  question :  What  is  the  standard  length 
of  a  degree,  a  minute,  a  second?  It  has  none  .  .  . 
but  so  soon  as  one  part  becomes  determined  by  the  nature 
of  a  scale,  all  the  rest  must  follow  in  proportion.  Of 
this  kind  of  money  ...  we  have  two  examples. 
The  bank  of  Amsterdam  presents  us  with  the  one,  the 
coast  of  Angola  with  the  other."* 

Steuart  speaks  here  simply  of  the  part  money  plays 
in  circulation  as  the  standard  of  price  and  money  of 
account  If  different  commodities  are  marked  in  the 
price-list  at  15s.,  20s.,  36s.,  respectively,  then  I  care, 

*  Steuart,  1.  c,  v.  II.,  p.  154,  299  [1st  London  edition,  of 
1767,  V.  I.,  p.  526-531.   Transl.]. 


—    98    — 

in  fact,  neither  vsr  the  silver  substance,  nor  for  the 
name  of  the  shilling  when  oomparing  the  magnitudes 
of  their  valuer,  The  ratios  between  the  numbers  15, 
20,  36,  tell  everything,  and  the  number  1  has  become 
the  only  unit  of  measure.  Only  the  abstract  proportion 
of  numbers  can  at  all  serve  as  a  purely  abstract  expres-^ 
sion  of  proportion.  In  order  to  be  consistent,  Steuart 
should  have  dropped  not  only  gold  and  silver,  but  their 
legal  baptismal  names  as  well.  Since  he  does  not  un- 
derstand the  nature  of  the  transformation  of  the  meas- 
ure of  value  into  a  standard  of  price,  he  naturally  be- 
lieves that  the  definite  quantity  of  gold  which  serves 
as  a  unit  of  measure  relates  as  a  measure  not  to  other 
quantities  of  gold,  but  to  values  as  such.  Since  com- 
modities appear  as  quantities  of  the  same  denomina- 
tion through  the  conversion  of  their  exchange  values 
into  prices,  he  denies  that  property  of  the  measure  which 
reduces  them  to  one  denomination;  and  since  in  this 
comparison  of  different  quantities  of  gold  the  quantity 
of  gold  which  serves  as  a  unit  of  measure  is  conventional, 
he  does  not  see  the  necessity  of  fixing  it  at  all.  Instead 
of  calling  1-360  part  of  a  circle  degree,  he  might  give 
that  name  to  1-1 80th  part;  the  right  angle  would  then 
be  measured  by  45  degrees  instead  of  90,  and  acute  and 
obtuse  angles  would  be  measured  accordingly.  Never- 
theless, the  measure  of  the  angle  would  remain,  then, 
as  before,  first  a  qualitatively  definite  mathematical  fig- 
ure, the  circle,  and  second  a  quantitatively  definite  part 
of  the  circle.  As  for  Steuarfs  economic  illustrations, 
he  refutes  his  own  argument  with  one  and  does  not  prove 
anything  with  the  other.    The  bank  money  of  Amster- 


—     99    — ■ 

dam  was,  in  fact,  merely  the  reckoning  name  for  Span- 
ish doubloons,  which  retained  their  full  weight  by  lying 
idly  in  the  bank  vaults,  while  the  circulating  coins  be- 
came thinner  from  hard  rubbing  against  the  outer  world. 
And  as  for  the  African  idealists  we  have  to  abandon 
them  to  their  fate  until  critical  travelers  will  tell  us 
more  about  them/  The  French  assignat  could  be  called 
an  almost  ideal  money  in  Steuart's  sense:  "National 
property.  Assignation  of  100  francs."  To  be  sure,  the 
use-value  which  the  assignation  was  supposed  to  repre- 
sent, namely,  the  confiscated  land,  was  indicated  here, 
but  the  quantitative  definition  of  the  unit  of  measure 
was  forgotten  and  "the  franc"  became  a  meaningless 
word.  How  much  or  how  little  land  the  assignation 
franc  represented  depended  on  the  results  of  the  public 
auctions.  In  practice,  however,  the  assignation  franc 
circulated  as  a  token  of  value  of  silver  money  and  its 
depreciation  was,  therefore,  measured  by  this  silver 
standard. 

The  period  of  the  suspension  of  cash  payments  by 
the  Bank  of  England  was  hardly  more  fruitful  of  war- 
bulletins  than  of  money  theories.  The  depreciation  of 
bank  notes  and  the  rise  of  the  market  price  of  gold 


*  On  the  occasion  of  the  last  commercial  crisis  the  ideal 
African  money  received  loud  praise  from  certain  English 
quarters,  after  its  seat  was  this  time  moved  from  the  coast 
to  the  heart  of  Barhary.  The  freedom  of  the  Berbers  from 
commercial  and  industrial  crises  was  ascribed  to  the  ideal  unit 
of  measure  of  their  bars.  Would  it  not  have  been  simpler  to 
say  that  trade  and  industry  are  the  conditio  sine  qua  non  of 
commercial  and  industrial  crises? 


—    100    -^ 

above  its  mint  price  called  forth  again  the  doctrine  of 
the  ideal  unit  of  money  on  the  part  of  some  of  the  ad- 
vocates of  the  Bank.  Lord  Castlereagh  found  the  clas- 
sical confused  expression  for  the  confused  idea  by  speak- 
ing of  the  unit  of  measure  of  money  as  "a  sense  of  value 
in  reference  to  currency  as  compared  with  commodi- 
ties." When  a  few  years  after  the  peace  of  Paris  con- 
ditions permitted  the  resumption  of  cash  payments,  the 
same  question  which  had  been  stirred  up  by  Lowndes 
under  William  III.,  came  up,  hardly  changed  in  form. 
An  enormous  government  debt,  as  well  as  a  mass  of 
private  debts,  accumulated  in  twenty  years,  fixed  obli- 
gations, etc.,  had  been  contracted  on  the  basis  of  de- 
preciated bank  notes.  Were  they  to  be  paid  back  in 
bank  notes  of  which  £4672,  10s.  nominal,  actually  rep- 
resented 100  pounds  of  22  carat  gold?  THOMAS  ATT- 
WOOD,  a  banker  of  Birmingham,  came  forth  as  Lowndes 
redivivus.  The  creditors  were  to  receive  nominally  as 
many  shillings  as  had  been  nominally  borrowed,  but  if 
about  1-78  of  an  ounce  of  gold  constituted  a  shilling 
according  to  the  old  standard  of  coinage,  then  say  1-90 
of  an  ounce  should  now  be  christened  a  shilling.  Att- 
wood's  adherents  are  known  as  the  Birmingham  school 
of  'little  shillingmen."  The  controversy  over  the  ideal 
money  unit,  which  had  started  in  1819,  still  went  on  in 
1845  between  Sir  Kobert  Peel  and  Attwood,  whose  own 
wisdom,  as  far  as  the  function  of  money  as  a  measure 
is  concerned,  is  exhaustively  summed  up  in  the  following 
passage,  in  which,  referring  to  Sir  Robert  Peel's  con- 
troversy with  the  Birmingham  Chamber  of  Commerce, 
he  says :     "The  substance  of  your  queries  is     .     .     .     in 


—     101     — 

what  sense  is  the  word  pound  to  be  used  ?  ...  To 
what  will  the  sum  one  pound  be  equivalent?  .  .  . 
Before  I  venture  a  reply  I  must  enquire  what  consti- 
tutes a  standard  of  value?  .  .  .  Is  £3  178.  lO^^d. 
an  ounce  of  gold,  or  is  it  only  of  the  value  of  an  ounce 
of  gold?  If  £3  17s.  10>^d.  be  an  ounce  of  gold,  why 
not  call  things  by  their  proper  names,  and,  dropping  the 
terms  pounds,  shillings  and  pence,  say  ounces,  penny- 
weights and  grains?  .  .  .  If  we  adopt  the  terms 
ounces,  pennyweights  and  grains  of  gold,  as  our  mone- 
tary system,  we  should  pursue  a  direct  system  of  bar- 
ter. .  .  .  But  if  gold  be  estimated  as  of  the  value 
of  £3  17s.  lO^d.  per  ounce  .  .  .  how  is  this 
.  .  .  that  much  difficulty  has  been  experienced  at 
different  periods  to  check  gold  from  rising  to  £5  48. 
per  ounce,  and  we  now  notice  that  gold  is  quoted  at 
£3  17s.  9d.  per  ounce?  .  .  .  The  expression  'pound 
has  reference  to  value,  but  not  a  fixed  standard  value. 
.  .  .  The  term  pound  is  the  ideal  unit,  ,  ,  . 
Labour  is  the  parent  of  cost  and  gives  the  relative  value 
to  gold  or  iron.  Whatever  denomination  of  words  are 
used  to  express  the  daily  or  weekly  labour  of  a  man, 
such  words  express  the  cost  of  the  commodity  pro- 
duced.^^^ 

In  the  last  words  the  hazy  conception  of  the  ideal 
money  measure  melts  away  and  its  real  meaning  breaks 
through.  The  reckoning  names  of  gold,  pound  sterling, 
shilling,  etc.,  should  be  names  for  definite  quantities 

^The  Currency  Question,  The  Gemini  Letters,  London,  1844, 
p.  260-272,  passim. 


—     102     — 

of  labor-time.  Since  labor-time  constitutes  the  sub- 
stance and  the  intrinsic  measure  of  values,  these  names 
would  then  actually  represent  definite  proportions  of 
value.  In  other  words,  labor-time  is  maintained  to  be 
the  true  unit  of  measure  of  money.  With  this  we  leave 
the  Birmingham  school,  but  should  add  in  passing  that 
the  doctrine  of  the  ideal  measure  of  money  acquired 
new  importance  in  the  controversy  over  the  question 
of  the  convertibility  or  non-convertibility  of  bank  notes. 
If  paper  receives  its  name  from  gold  or  silver,  then  the 
convertibility  of  a  note  or  its  exchangeability  for  gold 
or  silver  remains  an  economic  law,  no  matter  what  the 
civil  law  may  be.  Thus  a  Prussian  paper  thaler,  al- 
though legally  inconvertible,  would  immediately  depre- 
ciate if  it  were  worth  less  than  a  silver  thaler  in  ordi- 
nary trade,  i.  e.,  if  it  were  not  practically  convertible. 
The  consistent  advocates  of  inconvertible  paper  money 
in  England,  therefore,  sought  refuge  in  the  ideal  meas- 
ure of  money.  If  the  reckoning  names  of  money,  £, 
s.,  etc.,  are  names  of  certain  quantities  of  atoms  of  value, 
of  which  a  commodity  absorbs  or  loses  now  more,  now 
less  in  exchange  for  other  commodities,  then  an  English 
£5  note,  e.  g.,  is  just  as  independent  of  its  relation  to 
gold  as  of  that  to  iron  and  cotton.  Since  its  title  would 
no  more  imply  its  theoretical  equality  with  a  certain 
quantity  of  gold  or  any  other  commodity,  the  demand 
for  its  convertibility,  i.  e.,  for  its  practical  equality  with 
a  definite  quantity  of  a  specified  thing  would  be  excluded 
by  the  very  conception  of  the  note. 

The  theory  of  labor-time  as  the  direct  measure  of 
money  was   first  systematically   developed  by   JOHN 


103 


GRAY.^  He  makes  a  National  Central  Bank  ascertain 
through  its  branches  the  labor-time  consumed  in  the  pro- 
duction of  various  conmiodities.  The  producer  receives  an 
official  certificate  of  value  in  exchange  for  his  commodity, 
i.  e.,  he  gets  a  receipt  for  as  much  labor-time  as  his  com- 
modity contains,^  and  these  bank  notes  of  one  week*s 
labor,  one  day^s  labor,  one  hour's  labor,  etc.,  serve  at  the 
same  time  as  a  check  for  an  equivalent  in  all  other 
commodities  stored  in  the  bank  warehouses.^  This  is 
the  fundamental  principle  carefully  worked  out  in  de- 
tail and  based  throughout  on  existing  English  institu- 

*  John  Gray :  "The  Social  System.  A  Treatise  on  the  Principle 
of  Exchange,  Edinburgh,  1831."  Compare  with  "Lectures  on 
the  Nature  and  Use  of  Money,  Edinburgh,  1848,**  by  the  same 
author.  After  the  February  revolution  Gray  sent  a  memorial 
to  the  provisional  French  government,  in  which  he  instructs 
the  latter  that  France  is  not  in  need  of  an  "organization  of 
labour,**  but  of  an  "organization  of  exchange**  of  which  the 
plan  is  fully  worked  out  in  his  money  system.  Honest  John 
did  not  suspect  that  sixteen  years  after  the  appearance  of 
his  "Social  System*'  a  patent  for  the  same  discovery  would  be 
taken  out  by  the  ingenious  Proudhon. 

'Gray,  "The  Social  System,'*^ etc.,  p.  63:  "Money  should  be 
merely  a  receipt,  an  evidence  that  the  holder  of  it  has  either 
contributed  certain  value  to  the  national  stock  of  wealth  or 
that  he  has  acquired  a  right  to  the  same  value  from  some  one 
who  has  contributed  to  it.** 

'An  estimated  value  being  previously  put  upon  produce, 
let*  it  be  lodged  in  a  bank,  and  drawn  out  again,  whenever  it 
is  required,  merely  stipulating,  by  common  consent,  that  ha 
who  lodges  any  kind  of  property  in  the  proposed  National 
Bank,  may  take  out  of  it  an  equal  value  of  whatever  it  may 
contain,  instead  of  being  obliged  to  draw  out  the  self -same 
thing  that  he  put  in.**    L.  c,  p.  68. 


—     104     — 

tions.  Under  this  system,  says  Gray,  **to  sell  for  money 
may  be  rendered,  at  all  times,  precisely  as  easy  as  it  now 
is  to  buy  with  money;  .  .  .  production  would  be- 
come the  uniform  and  never-failing  cause  of  demand."* 
The  precious  metals  would  lose  their  "privilege"  as 
against  other  commodities  and  "take  their  proper  place 
in  the  market  beside  butter  and  eggs,  and  cloth  and 
calico,  and  then  the  value  of  the  precious  metals  will 
concern  us  just  as  little  ...  as  the  value  of  the 
diamond."*  "Shall  we  retain  our  fictitious  standard  of 
value,  gold,  and  thus  keep  the  productive  resources  of 
the  country  in  bondage?  or,  shall  we  resort  to  the  nat- 
ural standard  of  value,  labour,  and  thereby  set  our  pro- 
ductive resources  free?"* 

Labor-time  being  the  intrinsic  measure  of  value,  why 
should  there  be  another  external  measure  side  by  side 
with  it?  Why  does  exchange  value  develop  into  price? 
Why  do  all  commodities  estimate  their  value  in  one  ex- 
clusive commodity,  which  is  thus  converted  into  a  spe- 
cial embodiment  of  exchange  value  into  money?  That 
was  the  problem  which  Gray  had  to  solve.  Instead  of 
solving  it,  he  imagined  that  commodities  could  be  re- 
lated directly  to  each  other  as  products  of  social  labor. 
But  they  can  relate  to  each  other  only  in  their  capacity 
of  commodities.  Commodities  are  the  direct  products 
of  isolated  independent  private  labors,  which  have  to 
be  realized  as  universal  social  labor  through  their  alien- 
ation in  the  process  of  private  exchange,  that  is  to  say, 

»L.  c,  p.  16. 

■Gray:  "Lectures  on  Money,  etc.,"  p.  182. 
•  L.  c,  p.  169. 


—     1U5     — 

labor  basud  on  the  production  of  commodities  becomes 
social  labor  only  through  universal  alienation  of  indi- 
vidual labors.  But  by  assuming  that  the  labor-time  con- 
tained in  commodities  is  directly  social  labor-time.  Gray 
assumes  it  to  be  common  labor-time  or  labor-time  of  di- 
rectly associated  individuals.  Under  such  conditions  a 
Fpecific  commodity  like  gold  or  silver  could  not  con- 
front other  commodities  as  the  incarnation  of  universal 
labor,  and  exchange  value  would  not  be  turned  into 
r>rice;  but,  on  the  other  hand,  use-value  would  not  be- 
come exchange  value,  products  would  not  become  com- 
modities and  thus  the  very  foundation  of  the  capital- 
istic system  of  production  would  be  removed.  But  that 
is  not  what  Gray  has  in  mind.  Products  are  to  be  pro- 
duced as  commodities,  hut  are  not  to  be  exchanged  as 
commodities.  He  entrusts  a  national  bank  with  the 
carrying  out  of  this  pious  wish.  On  the  one  hand, 
society,  through  the  bank,  makes  individuals  indepen- 
dent of  the  conditions  of  private  exchange,  and  on  the 
other,  it  allows  them  to  go  on  producing  on  the  basis 
of  private  exchange.  The  logic  of  things,  however, 
compels  Gray  to  do  away  with  one  condition  of  capi- 
talistic production  after  another,  although  he  wishes 
to  "reform"  only  the  money  system  which  results  from 
the  exchange  of  commodities.  Thus  he  transforms  cap- 
ital into  national  capital,"  land  into  national  property,' 

^  "The  business  of  every  country  ought  to  be  conducted  on  a 
national  capital.'*  John  Gray,  "The  Social  System,"  etc., 
p.  171. 

*  "The  land  to  be  transformed  into  national  property."  L.  c. 
p.  298. 


—     106     — 

and  if  his  bank  is  to  be  watched  closely,  it  will  be  found 
that  it  not  only  receives  commodities  with  one  hand  and 
issues  certificates  for  work  delivered  with  the  other,  but 
that  it  regulates  production  as  well.  In  his  last  work, 
"Lectures  on  Money,'*  in  which  Gray  is  anxious  to  dem- 
onstrate that  his  labor-money  is  a  purely  bourgeois  re- 
form, he  gets  tangled  up  in  even  more  glaring  contra- 
dictions. 

Every  commodity  is  directly  money.  That  was  Gray's 
theory  deducted  from  his  incomplete  and,  therefore, 
false  analysis  of  commodities.  The  "organic"  structure 
of  "labor  money,"  the  "national  bank"  and  the  "ware- 
docks"  are  mere  fantastic  visions  in  which  the  dogma 
is  made  by  a  legerdemain  to  appear  to  us  as  a  universal 
law.  The  dogma  that  a  commodity  is  money  or  that 
the  isolated  labor  of  the  individual  contained  in  it 
is  direct  social  labor,  will  of  course  not  become  true 
through  the  mere  fact  that  a  bank  believes  in  it  and 
carries  on  operations  accordingly.  It  is  more  likely  that 
bankruptcy  would  play  in  that  case  the  part  of  the  prac- 
tical critic.  What  remains  concealed  in  Gray's  writings 
and  hidden  from  himself  as  well,  namely,  that  labor- 
money  is  a  well-sounding  economic  phrase  for  the  pious 
wish  to  get  rid  of  money,  and  with  money,  of  exchange 
value,  and  with  exchange  value,  of  commodities,  and 
with  commodities,  of  the  capitalistic  mode  of  produc- 
tion, was  clearly  expressed  by  some  English  socialists 
of  whom  a  few  preceded  and  others  followed  Gray.^ 

*  See  e.  g.  W.  Thompson :  "An  Inquiry  into  the  Distribution 
of  Wealth,  etc.,"  London,  1827.  Bray,  "Labour's  Wrongs  and 
Labour's  Remedy,"  Leeds,  1839. 


-    107    — 

But  it  remained  for  Mr.  Proudhon  and  his  school  to 
preach  in  all  earnest  the  degradation  of  money  and  the 
exaltation  of  the  commodity  as  the  gist  of  socialism  and 
thus  to  reduce  socialism  to  an  elementary  misconcep- 
tion of  the  necessary  connection  between  commodity 
and  money.* 

2.    THE  MEDIUM  OF  CIKCULATION. 

After  the  commodity  has  received  in  the  process  of 
price  determination  the  form  in  which  it  becomes  capa- 
ble of  circulation,  and  after  gold  has  acquired  the  charac- 
ter of  money  in  the  same  process,  circulation  will  both 
present  and  solve  the  contradictions  which  are  inherent 
in  the  process  of  exchange  of  commodities.  The  actual 
exchange  of  commodities,  i.  e.,  the  social  interchange  of 
matter  consists  of  a  change  of  form  in  which  is  unfolded 
the  double  character  of  the  commodity  as  use-value  and 
exchange  value,  and  at  the  same  time  its  own  change  of 
form  is  crystallized  in  distinct  forms  of  money.  To  de- 
scribe this  change  of  form  is  to  describe  circulation.  As 
we  have  seen,  given  a  world  of  commodities  and  with  it 
a  system  of  division  of  labor,  commodity  is  but  a  devel- 
oped form  of  exchange  value ;  in  the  same  manner,  cir- 
culation implies  a  steady  stream  of  exchange  transac- 
tions which  are  being  continually  renewed  on  all  sides. 
The  second  assumption  we  make  is  that  commodities 

*  Alfred  Darimont's  "De  la  Reforme  des  banques,"  Paris, 
1856,  may  be  considered  as  a  compendium  of  this  melodramatic 
theory  of  money. 


—     108    — 

enter  the  process  of  exchange  with  a  definite  price  or 
that  they  appear  to  each  other  in  that  process  in  a 
double  capacity,  really  as  use-values,  ideally — in  price — 
as  exchange  values. 

The  liveliest  streets  of  London  are  crowded  with 
stores  who?e  show  windows  are  filled  with  the  riches 
of  the  world,  Indian  shawls,  American  revolvers,  Chi- 
nese porcelain,  Parisian  corsets,  Russian  furs  and  trop- 
ical spices,  but  all  of  these  things  of  Joy  bear  fatal 
white  labels  marked  with  Arabian  figures  with  the  la- 
conic characters  £,  s.,  d.  Such  is  the  picture  of  the 
commodity  appearing  in  circulation. 

a.      THE   METAMORPHOSIS   OF    COMMODITIES. 

On  close  examination  the  process  of  circulation  is 

seen  to  consist  of  two  distinct  cycles.     If  we  denote 

commodity  by  the  letter  C  and  money  by  the  letter  M 

we  can  express  these  two  forms  as  follows : 

C— M— C 

M--C— M. 

In  this  chapter  we  are  interested  exclusively  in  the 
first  form,  i,  e.,  in  the  form  which  serves  as  the  direct 
expression  of  the  circulation  of  commodities. 

The  process  C — M — C  consists  of  the  movement 
C — M,  the  exchange  of  the  commodity  for  money,  or 
selling;  the  opposite  movement  M — C,  exchange  of 
money  for  a  commodity,  or  buying;  and  of  the  unity  of 
the  two  movements  C— M — C,  exchange  of  the  com- 
modity for  money  in  order  to  exchange  the  money  for 
a  commodity,  or  selling  in  order  to  buy.  But  the  result 
which  marks  the  end  of  the  process  is  C — C,  exchange 


—     109     — 

of  commodity  for  commodity,  real  interchange  of  mat- 
ter. 

If  we  look  at  it  from  the  extreme  end  of  the  first 
commodity,  C — M — C  represents  its  transformation  into 
gold  and  its  retransformation  from  gold  into  a  com- 
modity; a  movement  in  which  the  commodity  exists 
first  as  a  particular  use-value,  then  divests  itself  of  that 
character,  acquires  the  character  of  exchange  value  or 
universal  equivalent,  in  which  capacity  it  has  nothing 
in  common  with  its  natural  form,  then  throws  off  the 
last  form  as  well  to  remain  finally  an  actual  use-value 
for  the  satisfaction  of  particular  wants.  In  this  last 
form  it  falls  out  of  the  sphere  of  circulation  into  that 
of  consimiption.  The  entire  process  of  circulation 
C — M — C  thus  includes  the  combined  series  of  meta- 
morphoses, which  every  single  commodity  undergoes 
in  order  to  become  a  direct  use-value  to  its  possessor. 
The  first  metamorphosis  is  accomplished  in  the  first 
phase  of  the  circulation  process,  C — M;  the  second  in 
the  last  phase,  M — C;  and  the  entire  process  consti- 
tutes the  curriculum  vitae  of  the  commodity.  But  the 
process  C — ^M — C  represents  the  combined  metamor- 
phosis of  a  single  commodity  and  constitutes  at  the 
same  time  the  sum  of  certain  one-sided  metamorphoses 
of  other  commodities,  since  every  metamorphosis  of 
the  first  commodity  constitutes  its  transformation  into 
another  commodity  and  therefore  the  transformation  of 
the  other  commodity  into  it ;  hence  it  constitutes  a  two- 
fold transformation  which  takes  place  at  the  same 
stage  of  circulation.    We  must  then  consider  separately 


—    110    — 

each  of  the  two  processes  of  exchange  into  which  cir* 
culation  C — ^M — C  breaks  up. 

C — M  or  sale :  commodity  C  enters  the  process  of  cir- 
culation not  only  as  a  particular  use-value,  e.  g.,  a  ton 
of  iron,  but  as  a  use-value  of  a  certain  price,  say,  £3 
178.  10^  d.,  or  an  ounce  of  gold.  While  this  price  is  on 
the  one  hand  the  exponent  of  the  quantity  of  labor-time 
contained  in  a  ton  of  iron,  i.  e.,  of  the  magnitude  of  its 
value,  it  at  the  same  time  expresses  the  pious  wish  of 
the  iron  to  become  gold,  i.  e.,  to  give  to  the  labor-time 
it  contains  the  aspect  of  universal  social  labor-time. 
Unless  this  trans-substantiation  takes  place,  the  ton  of 
iron  not  only  ceases  to  be  a  commodity,  but  even  a  prod- 
uct, for  it  is  a  commodity  only  because  it  is  a  non-use- 
value  to  its  owner;  that  is  to  say,  his  labor  counts  as 
actual  labor  only  in  so  far  as  it  is  labor  useful  to  others, 
and  the  thing  is  useful  to  him  only  as  abstract  universal 
labor.  It  is,  therefore,  the  business  of  iron,  or  of  its 
owner,  to  find  that  point  in  the  world  of  commodities 
where  iron  attracts  gold.  But  this  difficulty,  the  salto 
mortale  of  the  commodity,  is  overcome  when  the  sale 
actually  takes  place,  as  is  assumed  here  on  the  analysis 
of  simple  circulation.  When  the  ton  of  iron  is  realized 
as  a  use-value  through  its  alienation,  i.  e.,  by  passing 
from  the  hands  in  which  it  is  a  non-use-value  to  hands 
in  which  it  is  a  use-value,  it  at  the  same  time  realizes 
its  price  and  from  mere  imaginary  gold  it  becomes  real 
gold.  In  place  of  the  name  one  ounce  of  gold  or  £3  17s. 
lOJ^d.,  an  ounce  of  real  gold  has  appeared,  but  the  ton 
of  iron  has  cleared  that  place.  Not  only  does  the  com- 
modity— which  in  its  price  had  been  ideally  converted 


—  Ill  — 

into  gold — actually  turn  into  gold  through  the  sale 
C — M,  but  gold,  which  as  a  measure  of  value  had  been 
only  ideal  money  and  in  fact  figured  merely  as  a  money 
name  of  commodities — is  now  turned  into  actual 
money*  by  the  same  process.  Just  as  gold  be- 
came the  ideal  universal  equivalent,  because  all  com- 
modities measured  their  values  by  it,  so  does  it 
now  become  the  absolutely  alienable  commodity,  real 
money,  because  it  is  the  product  of  the  universal 
alienation  of  commodities  for  it — and  the  sale  C — M 
is  the  process  by  means  of  which  that  universal  aliena- 
tion takes  place.  But  gold  becomes  real  money  only 
through  sale,  because  the  exchange  values  of  commod- 
ities were  already  ideal  gold  in  their  prices. 

In  the  sale  C — M,  as  well  as  in  the  purchase  M — C, 
two  commodities,  entities  of  exchange  value  and  use- 
value,  confront  each  other,  but  the  exchange  value  of 
the  commodity  exists  only  ideally  as  price ;  while  as  re- 
gards gold,  although  it  is  really  a  use-value,  its  use- 

*  "Di  due  sorte  fe  la  moneta,  ideale  e  reale ;  e  a  dui  diversi 
usi  fe  adoperata,  a  valutare  le  cose  e  a  comperarle.  Per  valutare 
h  buona  la  moneta  ideale,  cosi  come  la  reale  e  forse  anche  piu. 
L'altro  use  della  moneta  fe  di  comperare  quelle  cose  istesse, 
ch'ella  apprezza  .  .  .  i  prezzi  e  i  contratti  si  valutano  in 
moneta  ideale  e  si  eseguiscono  in  moneta  reale."  Galiani, 
1.  c,  p.  112  sq.  ("Money  is  of  two  kinds,  ideal  and  real;  and 
is  adapted  to  two  different  uses:  to  determine  the  value  of 
things  and  to  buy  them.  For  the  purpose  of  valuation  ideal 
money  is  as  good  as  real  and  perhaps  even  better.  The  other 
use  of  money  is  to  buy  the  same  things  which  it  appraises 
.  .  .  prices  and  contracts  are  determined  in  ideal  money 
and  are  executed  in  real  money.'*) 


value  is  confined  only  to  its  being  the  bearer  of  ex- 
change value  and  is,  therefore,  merely  a  formal  use- 
value,  having  no  relation  to  a  real  individual  want.  The 
antithesis  of  use-value  and  exchange  value  is  thus  dis- 
tributed at  the  two  extreme  poles  of  C — M,  so  that  the 
commodity  confronts  gold  as  a  use-value  which  has  yet 
to  realize  in  gold  its  exchange  value  or  its  price,  while 
gold  confronts  the  commodity  as  an  exchange  value, 
whose  formal  use-value  is  yet  to  be  realized  in  the  com- 
modity. Only  through  this  duplication  of  the  com- 
modity as  commodity  and  gold,  and,  further,  through 
the  twofold  and  polar  relation  by  virtue  of  which  each 
extreme  represents  but  ideally  what  its  opposite  is  in 
reality  and  is  in  reality  what  its  opposite  is  only  ideal- 
ly— in  short,  only  through  the  appearance  of  commod- 
ities as  two-sided  polar  opposites  are  the  contradictions 
solved  that  are  inherent  in  the  process  of  exchange. 

So  far  we  have  considered  C — M  as  sale,  as  the  con- 
version of  commodity  into  money.  But  if  we  look  at  it 
from  the  other  end,  the  same  process  will  assume  the 
form  M — C,  or  purchase,  i.  e.,  the  conversion  of  money 
into  commodity.  Sale  is  necessarily  its  opposite  at  the 
same  time;  it  is  the  former  if  we  look  at  the  process 
from  one  end,  and  the  latter  if  we  regard  the  process 
from  the  other  end.  In  practice  this  process  differs 
only  in  that  the  initiative  in  C — M  originates  at  the 
commodity  end  or  with  the  seller,  while  in  M — C  it 
comes  from  the  money  end  or  the  bu5^er.  In  describing 
the  first  metamorphosis  of  the  commodity,  its  conver- 
sion into  money  as  a  result  of  the  completion  of  the 
first  phase  of  circulation  C — M,  we  assume  at  the  same 


—     113     — 

time  that  another  commodity  has  been  converted  into 
money  and  is  now  in  its  second  phase  of  circulation, 
M — C.  Thus  we  get  into  a  vicious  circle  of  assumptions. 
Circulation  itself  constitutes  such  a  vicious  circle.  If 
we  did  not  consider  M  in  M — C  as  the  result  of  a  meta- 
morphosis  of  another  commodity,  we  would  thereby 
take  exchange  out  of  the  process  of  circulation.  But 
outside  of  the  latter  the  form  C — M  disappears  and  only 
two  different  Cs  confront  each  other,  say  iron  and  gold, 
the  exchange  of  which  does  not  constitute  a  part  of  the 
process  of  circulation,  being  direct  barter.  Gold,  at 
the  source  of  its  production,  is  a  commodity  like  any 
other  commodity.  Its  relative  value  and  that  of  iron 
or  of  any  other  commodity  is  expressed  here  in  quantities 
in  which  they  are  mutually  exchanged.  But  in  the 
process  of  circulation  this  operation  is  implied,  the 
value  of  gold  being  already  given  in  the  prices  of  com- 
modities. Nothing  can,  therefore,  be  more  erroneous 
than  the  idea  that  gold  and  commodity  enter  into  the 
relation  of  direct  barter  within  the  process  of  circula- 
tion and  that  their  relative  values  are  ascertained 
through  their  exchange  as  simple  commodities.  The 
illusion  that  gold  is  bartered  as  a  simple  commodity 
for  other  commodities  in  the  process  of  circulation  is 
due  to  the  fact  that  prices  represent  equations  in  which 
certain  quantities  of  commodities  are  made  equal  to 
certain  quantities  of  gold,  i.  e.,  that  the  commodities  are 
made  to  relate  to  gold  in  its  capacity  of  money,  as  a 
universal  equivalent,  and,  therefore,  appear  to  be  di- 
rectly exchangeable  for  it.  In  so  far  as  the  price  of  a 
commodity   is   realized   in   gold,   it  is   exchanged   for 


—     114    — 

gold  as  a  commodity,  as  a  particular  embodiment  of 
labor-time;  but  in  so  far  as  it  is  the  price  that  is  re- 
alized in  gold,  the  commodity  is  exchanged  for  gold  in 
its  capacity  of  money  and  not  of  a  commodity,  i.  e.,  it  is 
exchanged  for  gold  as  a  universal  embodiment  of  labor- 
time.  But  in  either  case  the  quantity  of  gold  for  which 
the  conmiodity  is  exchanged  in  the  process  of  circula- 
tion is  not  determined  by  exchange,  but  the  exchange 
is  determined  by  the  price  of  the  commodity,  i.  e.,  by 
its  exchange  value  estimated  in  gold/ 

Within  the  process  of  circulation  gold  appears  in 
everybody's  hands  as  the  result  of  sale  C — M.  But  since 
C — M,  sale,  is  at  the  same  time  M — C,  purchase,  it  is 
apparent  that  while  C,  the  commodity  from  which  the 
process  starts,  is  pasing  through  its  first  metamorphosis, 
another  commodity,  which  confronts  it  as  the  opposite 
pole  M,  is  completing  its  second  metamorphosis  and  is, 
therefore,  passing  through  the  second  phase  of  circula- 
tion, while  the  first  commodity  is  still  in  the  first  phase 
of  its  course. 

As  a  result  of  the  first  phase  of  circulation,  the  sale, 
we  get  money  which  is  the  starting  point  of  the  second 
phase.  In  place  of  the  commodity  in  its  first  form  ap- 
pears its  golden  equivalent.  This  result  may  now  form 
a  resting  point,  since  the  commodity  in  this  second  form 


*This,  of  course,  does  not  prevent  the  market  price  of  com- 
modities to  be  above  or  below  their  value.  However,  this  con- 
sideration is  foreign  to  simple  circulation  and  belongs  to  quite 
another  sphere  to  be  considered  later,  when  we  shall  investi- 
gate the  relation  between  value  and  market  price. 


—     115     — 

possesses  a  lasting  existence  of  its  own.  The  commod- 
ity, a  non-use-value  in  the  hands  of  its  possessor,  is  now 
on  hand  in  an  always  useful,  since  always  exchangeable, 
form,  and  it  depends  upon  circumstances  when  and  at 
what  point  of  the  surface  of  the  commodity  world  it 
will  again  enter  circulation.  Its  formation  into  a  gold 
chrysalis  constitutes  an  independent  period  in  its  life 
which  may  last  a  greater  or  less  length  of  time.  While 
in  the  case  of  barter  the  exchange  of  one  particular  use- 
value  is  directly  bound  up  with  the  exchange  of  another 
particular  use-value,  the  universal  character  of  labor 
which  creates  exchange  value  is  manifested  in  the  sep- 
aration and  lack  of  coincidence  of  acts  of  purchase  and 
sale. 

M — C,  purchase,  is  the  inverted  movement  of  C — M 
and  at  the  same  time  the  second  or  final  metamorphosis 
of  the  commodity.  As  gold,  i.  e.,  in  the  form  of  the  uni- 
versal equivalent,  the  commodity  can  be  directly  repre- 
sented in  the  use-values  of  all  other  commodities;  the 
latter  aspire  to  gold  as  their  hereafter,  but  at  the  same 
time  indicate  in  their  prices  the  key  in  which  it  must 
sound  in  order  that  their  bodies,  their  use-values,  may 
take  the  place  of  money,  while  their  souls,  their  ex- 
change-values, may  enter  gold.  The  universal  product 
of  the  alienation  of  commodities  is  the  absolutely  alien- 
able commodity.  There  is  no  qualitative  and  only  a 
quantitative  limit  to  the  transformation  of  gold  into 
commodity,  namely,  the  limit  of  its  own  quantity  or 
magnitude  of  its  value.  "Everjrthing  is  to  be  had  for 
cash."  While  in  the  movement  C — M,  the  commodity, 
through  its  alienation  as  a  use-value,  realizes  its  own 


—    116     — 

price  and  the  use-value  of  somebody  else's  money;  it 
realizes  in  the  movement  M — C,  through  its  alienation 
as  an  exchange  value,  its  own  use-value  and  the  price 
of  the  other  commodity.  While  through  the  realization 
of  its  price  the  commodity  transforms  gold  into  actual 
money,  it  turns  gold  into  its  merely  fleeting  money- 
form,  through  its  own  retransformation.  Since  the 
circulation  of  commodities  implies  an  extensive  division 
of  labor  and  consequently  a  diversity  of  wants  on  the 
part  of  individuals,  a  diversity  which  bears  an  inverse 
ratio  to  the  specialization  of  their  own  products,  the 
purchase  M — C  may  appear  as  an  equation  with  one  com- 
modity equivalent  or  split  up  into  a  series  of  commodity- 
equivalents  limited  by  the  variety  of  the  demands  of  the 
purchaser  and  by  the  amount  of  money  in  his  possession. 
Just  as  a  sale  is  a  purchase,  so  is  a  purchase  a  sale.  M — C 
is  at  the  same  time  C — M,  but  the  initiative  belongs  in 
this  case  to  gold  or  the  purchaser. 

Coming  back  now  to  C — M — C,  or  to  circulation  as 
a  whole,  it  is  apparent  that  it  contains  the  combined 
series  of  metamorphoses  through  which  a  commodity 
passes.  But  at  the  same  time  as  one  commodity  enters 
the  first  phase  of  its  circulation  and  completes  its  first 
metamorphosis,  another  commodity  enters  the  second 
phase  of  circulation,  completes  its  second  metamorphosis 
and  falls  out  of  circulation;  the  first  commodity  enters 
at  the  same  time  the  second  phase  of  circulation  com- 
pletes its  second  metamorphosis  and  falls  out  of  circu- 
lation, while  a  third  commodity  enters  circulation, 
passes  through  the  first  phase  of  its  course  completing 
the  first  metamorphosis. 


—     117     — 

Thus,  the  combined  circulation  C — M — C,  as  a  com- 
plete metamorphosis  of  a  commodity  always  constitutes 
at  the  same  time  the  end  of  the  complete  metamor- 
phosis of  another  commodity  and  the  beginning  of  a 
complete  metamorphosis  of  a  third  commodity,  i.  e.,  a 
series  without  beginning  or  end.  To  illustrate  this  let 
us  call  C  in  either  extreme  C  and  C  respectively,  in 
order  to  distinguish  the  commodities,  the  series  reading 
thus:  C — M — C.  The  first  member,  C — M,  presup- 
poses in  fact  that  M  is  the  result  of  another  transac- 
tion C — M,  and  is  thus  itself  merely  the  last  member 
of  a  series  C — M — C,  while  the  second  part  M — C  is 
merely  a  result  of  C" — M,  or  appears  as  the  first  part 
of  C — M — C'",  and  so  on.  Furthermore,  although  M  is 
the  result  of  only  one  sale,  it  appears  that  the  last  part 
M — C,  may  be  represented  as  M — C'  +  M — C"  -|- 
M — C,  etc.,  i.  e.,  it  may  be  split  up  into  a  number  of 
purchases,  and  consequently  a  number  of  sales,  or  into 
a  number  of  first  members  of  new  complete  metamor- 
phoses of  commodities.  Since  the  complete  metamor- 
phosis of  a  single  commodity  thus  appears  as  a  link  not 
only  of  one  endless  chain  of  metamorphoses,  but  of 
many  such  chains,  the  process  of  circulation  in  the  world 
of  commodities  presents  a  hopeless  confusion  of  inter- 
twined movements  constantly  ending  and  starting  anew 
at  a  countless  number  of  points.  But  every  single  sale 
or  purchase  stands  as  an  independent  isolated  act,  whose 
supplemental  act  may  be  separated  from  it  in  time  and 
place,  and  therefore  does  not  need  to  follow  it  directly 
as  its  continuation.  Every  separate  process  of  circula- 
tion, C — ^M  or  M — C,  as  a  transformation  of  one  com- 


—    118    — 

modity  into  use-value  and  of  another  into  money,  i.  e., 
as  the  first  and  second  phases  of  circulation  respective- 
ly forms  an  independent  halting  point  from  either  di- 
rection; but,  on  the  other  hand,  all  commodities  com- 
mence their  second  metamorphosis  in  the  common  form 
of  the  universal  equivalent,  gold,  and  stop  at  the  start- 
ing point  of  the  second  phase  of  circulation;  for  that 
reason  any  M — C  dovetails  in  actual  circulation  with 
any  C — M;  the  second  chapter  in  the  life-course  of 
one  commodity  with  the  first  chapter  of  that  of  another 
commodity.  A,  e.  g.,  sells  £2  worth  of  iron.  He  thus 
completes  the  transaction  C — M  or  the  first  metamor- 
phosis of  commodity  iron,  but  postpones  his  purchase 
until  some  other  time.  At  the  same  time  B,  who  sold 
2  quarters  of  wheat  for  £6  a  fortnight  since,  buys  with 
the  same  £6  a  coat  and  trousers  of  Moses  &  Son,  thus 
completing  M — C  or  the  second  metamorphosis  of  the 
commodity,  wheat. 

The  two  transactions  M — C  and  C — M  appear  here 
merely  as  links  of  one  chain,  because  a  commodity  ex- 
pressed in  gold  looks  like  any  other  commodity,  and 
one  cannot  tell  by  the  looks  of  the  gold  whether  it  is 
transformed  iron  or  transformed  wheat.  C — M — C  ap- 
pears, therefore,  in  the  actual  process  of  circulation  as 
a  jumble  of  countless  accidentally  coinciding  or  suc- 
cessively following  members  of  different  complete  meta- 
morphoses. The  actual  process  of  circulation  thus  ap- 
pears not  as  a  complete  metamorphosis  of  a  commodity, 
not  as  its  movement  through  opposite  phases,  but  as  a 
mere  agglomeration  of  many  accidentally  coinciding  or 
successive  purchases  and  sales.    The  process  thus  loses 


—     119     — 

all  clearness  of  outline  which  is  so  much  more  the  case 
since  every  single  act  of  circulation,  e.  g.,  sale,  is  at  the 
same  time  its  opposite,  purchase,  and  vice  versa.  On  the 
other  hand,  the  process  of  circulation  is  nothing  but 
the  movement  of  metamorphoses  in  the  world  of  com- 
modities and,  therefore,  must  reflect  them  also  in  its 
movement  as  a  whole.  How  that  reflection  takes  place 
we  shall  consider  in  the  following  chapter.  It  may  be 
added  here  that  in  C — M — C  the  two  extreme  Cs  con- 
stitute two  forms  of  commodities  which  do  not  bear  the 
same  relation  to  M.  The  first  C  relates  to  money  as  a 
commodity  of  a  special  class  to  a  universal  commodity, 
while  money  relates  to  the  second  C  as  a  universal  com- 
modity to  an  individual  commodity.  C — ^M — C  can, 
therefore,  be  reduced  by  abstract  logic  to  the  final  form 
S — ^U — ^I  in  which  S,  standing  for  species,  forms  the 
first  extreme;  U,  signifying  universality,  forms  the 
connecting  medium,  and  I,  individuality,  constitutes 
the  last  extreme. 

The  owners  of  commodities  entered  the  sphere  of 
circulation  simply  as  guardians  of  commodities.  Within 
that  sphere  they  confront  each  other  in  the  opposite 
roles  of  buyer  and  seller,  one  as  a  personified  sugar-loaf, 
the  other  as  personified  gold.  As  soon  as  the  sugar- 
loaf  is  turned  into  gold,  the  seller  becomes  a  buyer. 
These  definite  social  functions  are  no  outgrowths  of 
human  nature,  but  are  the  products  of  relations  of  ex- 
change between  men  who  produce  their  goods  in  the 
form  of  commodities.  They  are  so  far  from  being  pure- 
ly individual  relations  between  buyer  and  seller  that 
both  enter  this  relation  only  to  the  extent  that  their 


120 


individual  labor  is  disregarded  and  is  turned  into  money 
as  labor  of  no  individual.  Just  as  it  is,  therefore,  child- 
ish to  consider  these  economic  bourgeois  roles  of  buyer 
and  seller  as  eternal  social  forms  of  human  individu- 
ality, so  it  is  on  the  other  hand,  preposterous  to  lament 
in  them  the  extinction  of  individuality/  They  are  the 
necessary  manifestations  of  individuality  at  a  certain 
stage  of  the  social  system  of  production.  Moreover,  in 
the  opposition  of  buyer  and  seller  the  antagonistic  nature 

*  How  deeply  some  beautiful  souls  are  wounded  by  the  merely 
superficial  aspect  of  the  antagonism  which  asserts  itself  in  buy- 
ing and  selling,  may  be  seen  from  the  following  abstract  from 
M.  Isaac  Pereire's:  "Legons  sur  I'industrie  et  les  finances," 
Paris,  1832.  The  fact  that  the  same  Isaac  in  his  capacity  of 
inventor  and  dictator  of  the  "Credit  mobilier"  has  acquired  the 
reputation  of  the  wolf  of  the  Paris  Bourse  shows  what  lurks 
behind  the  sentimental  criticism  of  economics.  Says  Mr.  Pereire. 
at  the  time  an  apostle  of  St.  Simons:  "C'est  parceque  tous  les 
individus  sont  isolfej,  s6par6s  les  uns  des  autres,  soit  dans  leur 
travaux,  soit  pour  la  consommation,  qu'il  y  a  echange  entre 
eux  des  produits  de  leur  industrie  respective.  De  la  necessity 
de  r^change  est  deriv6e  la  necessity  de  determiner  la  valeur 
relative  des  objets.  Les  id6es  de  la  valeur  et  de  I'fichange 
sont  done  intimement  li^es,  et  toutes  deux  dans  leur  forme 
actuelle  exprime  Tindividualisme  et  I'antagonismc  .  ^  .  II 
n'y  a  lieu  a  fixer  la  valeur  des  produits  que  parcequ'il  y  a 
vente  at  achat,  en  d'autres  termes,  antagonisme  entre  les  divers 
membres  de  la  society.  II  n'y  a  lieu  a  s'occuper  du  prix,  de 
valeur  que  19.  oH  il  y  avait  vente  et  echat,  c'est  h  dire,  ofi  chaque 
individu  6tait  oblige  de  1  utter,  pour  se  procurer  les  object 
n^essaires  a  Pentretien  de  son  existence"  (1.  c,  p.  2,  3  pas- 
sim). ("Since  individuals  are  isolated  and  separated  from 
one  another  both  in  their  labors  and  in  consumption,  exchange 
takes  place  between  them  in  the  products  of  their  respective 


—     121     — 

of  capitalistic  production  is  expressed  as  yet  so  super- 
ficially and  as  mere  matter  of  form,  that  this  opposition 
belongs  also  to  precapitalistic  forms  of  society,  since  it 
merely  requires  that  the  mutual  relations  of  individuals 
should  be  those  of  owners  of  commodities. 

Now,  if  we  consider  the  result  of  C — M — C,  it  comes 
down  to  mere  interchange  of  matter,  C — C.  A  com- 
modity has  been  exchanged  for  a  commodity,  a  use- 
value  for  a  use-value,  and  the  transformation  of  the 
commodity  into  money,  or  the  commodity  in  its  form  of 
money,  serves  merely  as  a  means  of  effecting  this  inter- 
change of  matter.  Money  thus  appears  merely  as  a 
medium  of  exchange  of  commodities;  not  as  a  medium 
of  exchange  in  general,  but  as  a  means  of  exchange  in 
the  sphere  of  circulation,  i.  e.,  a  medium  of  circulation.^ 

industries.  From  the  necessity  of  exchange  arises  the  necessity 
of  determining  the  relative  value  of  things.  The  ideas  of 
value  and  exchange  are  thus  intimately  connected  and  both 
express  in  their  actual  form  individualism  and  antagonism. 
.  .  .  The  determination  of  values  of  products  takes  place 
only  because  there  are  sales  and  purchases,  or,  to  put  it  differ- 
ently, because  there  is  an  antagonism  between  different  mem- 
bers of  society.  One  has  to  occupy  himself  with  price  and 
value  only  where  there  is  sale  and  purchase,  that  is  to  say, 
where  every  individual  is  obliged  to  struggle  to  procure  for 
himself  the  objects  necessary  for  the  maintenance  of  his  ex- 
istence." ) 

'  "L'argent  n*est  que  le  moyen  et  I'acheminement,  au  lieu  que 
les  denr^es  utiles  H  la  vie  sont  la  fin  et  le  but."  (**Moncy  is 
but  the  ways  and  means,  while  the  things  useful  in  life  are 
the  end  and  object.")  Boisguillebert :  "Le  Detail  de  la  France," 
1697,  in  Eugene  Daires*  "Economistes  financiers  du  XVIII 
ieme  siecle,  vol.  I.,  Paris,  1843.  p.  210. 


—     122     — 

We  have  seen  that  the  process  of  circulation  of  com- 
modities comes  to  a  completion  in  C — C,  appearing  as 
mere  barter  carried  on  by  means  of  money;  further, 
that  C — M — C  represents  in  general  not  only  two  iso- 
lated processes,  but  their  dynamic  union  as  well;  but 
to  draw  from  that  the  conclusion  that  purchase  and  sale 
form  an  indivisible  unit,  is  a  mode  of  thinking  the  crit- 
icism of  which  belongs  to  the  domain  of  logic,  and  not 
to  that  of  economics.  The  separation  of  purchase  and 
sale  in  the  process  of  exchange  destroys  all  local,  prim- 
itive, patriarchal  and  naively  genial  barriers  to  inter- 
change of  matter  in  society.  It  is,  moreover,  the  gen- 
eral form  of  the  separation  of  the  points  of  coincidence 
and  opposition  in  this  interchange,  carrying  within  it 
the  possibility  of  commercial  crises,  because  the  antag- 
onism of  commodity  and  money  is  the  abstract  and 
general  form  of  all  antagonisms  with  which  the  capi- 
talistic system  of  labor  is  pregnant.  Hence,  circulation 
of  money  is  possible  without  crises,  but  crises  can  not 
occur  without  money  circulation.  In  other  words,  where 
labor  based  on  the  system  of  private  exchange  has  not 
reached  the  stage  marked  by  the  existence  of  money, 
it  is  less  capable  of  producing  those  phenomena  which 
presuppose  the  full  development  of  the  capitalistic 
mode  of  production.  Bearing  this  in  mind  we  can 
appreciate  the  depth  of  the  criticism  which  proposes  to 
do  away  with  the  ^'shortcomings"  of  capitalistic  pro- 
duction by  abolishing  the  "privilege"  enjoyed  by  the 
precious  metals  and  introducing  a  so-called  "rational 
monetary  system.^'  As  a  sample  of  economic  defence 
of  an  opposite  character  may  serve  the  following  piece 


—     123     — 

of  reasoning  which  has  been  proclaimed  exceedingly 
keen,  JAMES  MILL,  the  father  of  the  well-known 
English  economist,  John  Stuart  Mill,  says:  "Whatever 
.  .  .  be  the  amount  of  the  annual  produce,  it  never 
can  exceed  the  amount  of  the  annual  demand  .  .  . 
Of  two  men  who  perform  an  exchange,  the  one  does 
not  come  with  only  a  supply,  the  other  with  only  a  de- 
mand; each  of  them  comes  with  both  a  demand  and  a 
supply.  .  .  .  The  supply  which  he  brings  is  the 
instrument  of  his  demand;  and  his  demand  and  supply 
are  of  course  exactly  equal  to  one  another.  It  is  there- 
fore, impossible  that  there  should  ever  be  in  any  coun- 
try a  commodity  or  commodities  in  quantity  greater 
than  the  demand,  without  there  being,  to  an  equal 
amount,  some  other  commodity  or  commodities  in  quan- 
tity less  than  the  demand."* 


*In  November,  1807,  William  Spence  published  a  pamphlet 
in  England  under  the  title:  "Britain  Independent  of  Com- 
merce." The  principle  set  forth  in  this  pamphlet  was  further 
elaborated  by  William  C!obbet  in  his  "Political  Register"  under 
the  virulent  title,  "Perish  Commerce."  To  this  James  Mill  re- 
plied in  1808  in  his  "Defence  of  Commerce"  which  contains  the 
passage  quoted  above  from  his  "Elements  of  Political  Econ- 
omy** (p.  190-193,  Transl.).  In  his  controversy  with  Sismondi 
and  Malthus  on  commercial  crises,  J.  B.  Say  appropriated  this 
clever  device,  and  as  it  would  be  diflScult  to  point  out  with 
what  new  idea  this  comical  "prince  de  la  science"  had  enriched 
political  economy,  his  continental  admirers  have  trumpeted  him 
as  the  man  who  had  unearthed  the  treasure  of  the  metaphysical 
balance  of  purchases  and  sales;  as  a  matter  of  fact,  his  merits 
consisted  rather  of  the  impartiality  with  which  he  equally  mis- 
understood his  contemporaries,  Malthus,  Sismondi  and  Ricardo. 


—     124     — 

Mill  restores  the  balance  by  turning  the  process  of 
circulation  into  direct  barter  and  then  smuggling  into 
direct  barter  the  character  of  buyer  and  seller  borrowed 
by  him  from  the  process  of  circulation.  To  put  it  in 
his  own  confused  language,  during  certain  periods  when 
all  commodities  are  unsaleable  there  are  really  more 
buyers  than  sellers  of  one  commodity,  money,  and  more 
sellers  than  buyers  of  all  other  money,  commodities; 
such  was,  e.  g.,  the  case  at  certain  moments  during  the 
commercial  crisis  of  1857-58  in  London  and  Hamburg. 
Xhe  metaphysical  balance  of  purchases  and  sales  amounts 
to  this,  that  every  purchase  is  a  sale  and  every  sale  is  a 
purchase,  which  is  a  poor  consolation  to  the  guardian  of 
the  commodity  who  can  not  bring  about  its  sale  and 
therefore  can  not  buy.* 

The  separation  of  sale  and  purchase  makes  possible 

^  The  maimer  in  which  economists  explain  the  different  aspects 
of  the  commodity  may  be  seen  from  the  following  examples: 

"With  money  in  possession,  we  have  but  one  exchange  to 
make  in  order  to  secure  the  object  of  desire,  while  with  other 
surplus  products  we  have  two,  the  first  of  which  ( procuring  the 
money)  is  infinitely  more  difficult  than  the  second."  (G.  Opdyke, 
"A  Treatise  on  Political  Economy,"  New  York,  1851,  p.  277-278.) 

"The  superior  saleableness  of  money  is  the  exact  eflTect  or 
natural  consequence  of  the  less  saleableness  of  commodities." 
(Th.  Oorbet,  "An  Inquiry  into  the  Causes  and  Modes  of  the 
Wealth  of  Individuals,"  etc.,  London,  1841,  p.  117.) 

**Money  has  the  quality  of  being  always  exchangeable  for 
what  it  measures."  (Bosanquet,  "Metallic,  Paper  and  Credit 
Currency,"  etc.,  London,  1842,  p.  100.) 

"Money  can  always  buy  other  commodities,  whereaa  other 
commodities  can  not  always  buy  money."  (Th.  Tooke,  "An  In- 
quiry into  the  Currency  Principle,"  2d  ed.,  London,  1844,  p.  10.) 


—     125     — 

a  large  number  of  fictitious  transactions  side  by  side 
with  genuine  trade  before  the  final  exchange  between 
the  producer  and  the  consumer  of  commodities  takes 
place.  It  enables  a  host  of  parasites  to  penetrate  the 
process  of  production  and  exploit  the  separation.  But 
this,  again,  means  that  with  money  as  the  universal 
form  of  labor  under  the  capitalist  system,  there  is  the 
possibility  of  the  development  of  its  contradictions. 

b.  THE  CIKCULATIOX  OF  MONEY. 

Actual  circulation  appears  at  first  sight  as  a  mass 
of  purchases  and  sales  accidentally  taking  place  side  by 
side.  In  buying  as  in  selling,  commodities  and  money 
always  stand  in  the  same  mutual  relation :  the  seller,  on 
the  side  of  the  commodity ;  the  buyer,  on  that  of  money. 
Money  as  a  medium  of  circulation  always  appears  there- 
fore as  a  means  of  purchase;  and  in  that  way  the 
difference  in  its  destinations  in  the  opposite  phases  of 
the  metamorphosis  of  the  commodity  becomes  indis- 
tinguishable. 

Money  passes  into  the  hands  of  the  seller  in  the 
same  transaction  in  which  the  commodity  passes  into 
the  hands  of  the  buyer.  Commodities  and  money 
thus  flow  in  opposite  directions  and  this  change 
of  place  in  which  the  commodity  passes  over  to  one 
side  and  money  to  the  other  side,  occurs  simultaneously 
at  an  indefinitely  large  number  of  points  on  the 
entire  surface  of  bourgeois  society.  But  the  first 
step  which   the  commodity  makes  in  the   sphere  of 


—    126    — 

circulation  is  also  its  last  step.*  Wliether  it  leaves  its 
place  on  account  of  its  attraction  for  gold  (C — M),  or 
on  account  of  its  attraction  by  gold  (M — C),  with  one 
move,  with  one  change  of  place  it  falls  out  of  the  sphere 
of  circulation  into  that  of  consumption.  Circulation  is 
a  continuous  flow  of  commodities,  but  different  com- 
modities all  the  time,  since  each  commodity  makes  but 
one  move.  Every  commodity  enters  upon  the  second 
phase  of  its  circulation  not  as  the  same  commodity,  but 
as  another  commodity,  gold.  Hence  the  movement  of  a 
metamorphosed  commodity  is  the  movement  of  gold. 
The  same  piece  of  gold  or  the  identical  gold  coin  which 
changed  places  with  one  commodity  in  the  act  C — M, 
reappears  from  the  opposite  end  as  the  starting  point 
for  M — C  and  thus  changes  places  for  the  second  time 
with  another  commodity.  Just  as  it  passed  from  the 
hands  of  buyer  B  into  those  of  seller  A,  it  now  leaves 
A's  hands  who  has  become  a  buyer  and  passes  into  C's 
hands.  The  path  described  by  a  commodity  in  its  trans- 
formation into  money  and  its  retransformation  from 
money,  i.  e.,  the  movement  of  a  complete  metamor- 
phosis of  a  commodity  assumes  the  aspect  of  an  apparent 
movement  of  the  same  coin  that  changes  places  twice 
with  two  different  commodities.  No  matter  in  how 
scattered  and  haphazard  fashion  purchases  and  sales  may 
take  place  near  each  other,  there  is  always  in  actual 


*  The  same  commodity  can  be  bought  and  resold  many  times. 
It  circulates,  then,  not  merely  as  a  commodity,  but  in  a  capacity 
which  does  not  exist  from  the  point  of  view  of  simple  circula- 
tion, of  the  simple  contrast  of  commodity  and  money. 


—     127     — 

circulation  a  seller  for  each  buyer  and  the  money  which 
moves  into  the  place  of  the  commodity  sold,  before  it 
came  into  the  hands  of  the  buyer,  must  have  already 
changed  places  with  another  commodity.  Sooner  or 
later  it  again  leaves  the  hands  of  the  seller,  who  turns 
buyer,  to  pass  into  the  hands  of  a  new  seller  and  this 
frequently  repeated  change  of  place  forms  the  interlac- 
ing of  the  metamorphoses  of  commodities-  The  same 
coins  are  moving,  some  more,  others  less  frequently,  from 
one  place  in  the  sphere  of  circulation  to  another,  always 
in  the  direction  opposite  to  that  of  the  commodities 
moved,  thus  describing  a  longer  or  shorter  circulation- 
curve.  The  different  movements  of  the  same  coin  can  fol- 
low each  other  in  point  of  time  only,  and  on  the  contrary, 
the  many  scattered  purchases  and  sales  which  appear 
as  so  many  separate  changes  of  place  between  commod- 
ities and  money,  occur  simultaneously  separated  only  in 
point  of  space. 

The  circulation  of  commodities  C — M — C  in  its  ele- 
mentary form  is  completely  described  in  the  transition 
of  money  from  the  hands  of  the  buyer  into  those  of  the 
seller  and  from  the  hands  of  the  latter,  as  soon  as  he 
has  turned  buyer,  into  those  of  a  new  seller.  This  com- 
pletes the  metamorphosis  of  the  commodity  and  with  it 
the  movement  of  money  in  so  far  as  that  movement  is 
the  expression  of  the  metamorphosis.  But  since  new 
use-values  are  continually  produced  in  the  shape  of  new 
commodities  and  must  thus  be  constantly  thrown  anew 
into  circulation,  the  process  C — M — C  is  repeatedly  re- 
newed by  the  same  commodity  owners.  The  money  which 
they  have  spent  as  buyers  gets  back  into  their  hands 


—     128     — 

as  soon  as  they  appear  again  as  vendors  of  commodities. 
The  constant  renewal  of  the  circulation  of  commodities 
finds  its  reflection  in  the  continual  circulation  over  the 
entire  surface  of  bourgeois  society  of  a  quantity  of  money 
which,  passing  from  hand  to  hand,  describes  at  the  same 
time  a  nimiber  of  different  small  cycles  starting  from 
numberless  points  and  returning  each  to  its  own  start- 
ing point,  to  repeat  the  same  movement  over  again. 

The  change  of  form  on  the  part  of  commodities  ap- 
pears as  a  mere  change  of  place  on  the  part  of  money 
and  the  continuity  of  the  circulation  movement  is  all 
on  the  side  of  money,  since  the  commodity  always  makes 
but  one  step  in  the  direction  opposite  to  money,  while 
the  latter  makes  in  each  case  the  second  step  for  the 
commodity;  the  entire  movement  seems,  therefore,  to 
proceed  from  money,  although  in  the  case  of  a  sale  the 
commodity  draws  money  out  of  its  place,  i.  e.,  it  circu- 
lates money  as  much  as  it  is  circulated  by  the  latter  in 
the  case  of  a  purchase.  Furthermore,  owing  to  the  fact 
that  money  always  confronts  commodities  in  its  capac- 
ity of  a  means  of  purchase,  and  in  that  capacity  moves 
commodities  only  by  realizing  their  price,  the  entire 
movement  ot  circulation  appears  as  a  change  of  place 
between  money  and  commodities,  the  former  realiz- 
ing the  prices  of  the  latter  either  by  separate  acts  of 
circulation  taking  place  simultaneously  and  side  by 
side,  or  by  successive  transactions  when  the  same  coin 
realizes  the  prices  of  different  commodities  one  after 
another.  If  we  consider,  e.  g.,  the  series  C — ^M — C — 
M — C — M — C",  etc.,  without  regard  to  the  qualitative 
aspects  which  become  indistinguishable  in  the  process 


—     129     — 

of  circulation,  we  witness  the  same  monotonous  opera- 
tion. After  realizing  the  price  of  C,  M  successively  re- 
alizes those  of  C,  C",  etc.,  and  commodities  C,  C, 
C",  etc.,  constantly  take  the  place  which  money  has  left. 
Money  thus  appears  to  keep  commodities  in  circulation 
by  realizing  their  prices.  In  discharging  this  function 
of  realization  of  prices,  money  is  itself  constantly  cir- 
culating, now  changing  its  place,  now  describing  a  curve 
of  circulation,  now  completing  a  small  circuit  where  the 
starting  and  returning  points  coincide.  As  a  medium  of 
circulation,  money  is  subject  to  a  circulation  of  its  own. 
The  change  of  form  of  the  circulating  commodities  ap- 
pears, therefore,  as  a  movement  of  money  which  furthers 
the  exchange  of  commodities,  motionless  in  themselves. 
The  movement  of  the  circulation  process  of  commodities 
thus  takes  on  the  form  of  the  movement  of  gold  as  a 
medium  of  circulation,  i.  e.  of  the  circulation  of  money. 
Since  owners  of  commodities  give  the  products  of  their 
individual  labor  the  appearance  of  products  of  social 
labor  by  turning  one  object,  viz.  gold,  into  the  direct 
expression  of  universal  labor-time  and  therefore  into 
money,  their  own  movement  by  which  all  of  them  effect 
the  interchange  of  the  material  products  of  their  labor 
now  appears  to  them  as  the  direct  movement  of  that 
one  object,  as  the  circulation  of  gold.  The  social  move- 
ment itself  appears  to  the  owners  of  commodities  partly 
as  an  outward  necessity  and  partly  as  a  mere  formal  in- 
termediary process  which  enables  every  individual  who 
puts  any  use-value  into  circulation  to  get  other  use- 
values  out  of  it  of  an  equal  value.  The  use-value  of 
commodities  comes  into  play  with  their  disappearance 


^     130     — 

from  the  sphere  or  circulation,  while  the  nse-value  of 
money  as  a  medium  of  circulation  is  in  its  Tery  circula- 
tion. The  movement  of  a  commodity  in  the  sphere  or 
circulation  is  of  a  transitory  kind,  while  ceaseless  mo- 
tion in  that  sphere  constitutes  the  function  of  money. 
•Through  this  special  function  which  it  performs  within 
the  sphere  of  circulation  money  acquires  a  new  capacity, 
which  we  have  to  consider  now  more  closely. 

In  the  first  place,  we  see  that  the  circulation  of  money 
forms  an  endlessly  split  up  movement,  since  it  reflects 
the  splitting  up  of  the  process  of  circulation  into  an  in- 
finitely large  number  of  purchases  and  sales  and  the  in- 
dependent separation  of  the  mutually  supplementary 
phases  of  metamorphoses  of  commodities.  In  the  small 
cycles  described  by  money,  where  the  starting  and  re- 
turning points  coincide,  we  do  find  a  return  movement, 
i.  e.,  an  actual  circular  movement,  but  the  fact  that  there 
are  as  many  starting  points  as  there  are  commodities  and 
that  the  number  of  these  cycles  is  infinitely  large  puts 
them  beyond  all  control,  measurement,  or  computation. 
The  time  between  the  start  and  the  return  of  a  com- 
modity is  just  as  indefinite.  Moreover,  it  is  immaterial 
whether  or  not  such  a  circuit  has  been  actually  described 
in  a  given  case.  No  economic  fact  is  more  generally 
known  than  that  one  can  spend  money  with  one  hand 
without  getting  it  back  with  the  other.  Money  proceeds 
from  an  endless  number  of  points  and  returns  to  as  many 
different  points,  but  the  coincidence  of  the  starting  and 
returning  points  is  a  matter  of  chance,  because  in  the 
movement  C — M — C  the  turning  of  the  buyer  again  into 
&  seller  is  not  a  necessary  condition.     Still  less  does  the 


—     131     — 

circulation  of  money  resemble  a  movement  radiating 
from  a  common  centre  to  all  points  of  the  periphery  and 
back  from  the  peripheral  points  to  the  centre.  The  so- 
called  cycle  described  by  money,  as  it  is  pictured, 
amounts  simply  to  this,  that  at  all  points  we  observe  its 
appearance  and  disappearance,  its  never  ceasing  transi- 
tion from  place  to  place.  In  a  higher,  more  involved 
form  of  money  circulation,  e.  g.  bank-note  circulation, 
we  shall  find  that  the  conditions  of  emission  of  money 
include  those  for  its  return.  But  in  the  simple  money 
circulation  it  is  a  matter  of  chance  for  the  same  buyer 
to  become  again  a  seller.  Where  we  really  see  constant 
cycle  motions  taking  place,  they  are  only  reflections  of 
deeper  forces  in  the  sphere  of  production,  e.  g.,  the  man- 
ufacturer draws  money  from  his  banker  on  Friday,  pays 
it  out  to  his  workingmen  on  Saturday,  the  men  im- 
mediately pay  out  the  greater  part  of  it  to  the  store- 
keepers, etc,  and  the  latter  turn  it  in  on  Monday  back 
to  the  banker. 

We  have  seen  that  money  realizes  simultaneously  a 
certain  number  of  prices  in  the  variegated  purchases  and 
sales  which  take  place  side  by  side  at  the  same  time.  On 
the  other  hand,  in  so  far  as  its  movement  represents  the 
movement  of  the  combined  metamorphoses  of  commodi- 
ties and  the  interlacing  of  these  metamorphoses,  the 
same  coin  realizes  the  prices  of  different  com- 
modities and  thus  makes  a  larger  or  smaller  number  of 
moves.  If  we  take  the  circulation  of  a  country  for  a 
given  length  of  time,  say  a  day,  the  quantity  of  gold 
required  for  the  realization  of  prices  and,  consequently, 
for  the  circulation  of  commodities,  will  be  determined 


— .     132     — 

by  two  conditions:  first,  the  sum  total  of  the  prices;  sec- 
ond, the  average  number  of  moves  made  by  one  coin. 
This  number  of  moves  or  the  rapidity  of  circulation  of 
money  is  in  its  turn  determined  by  or  expresses  the 
average  rapidity  with  which  commodities  go  through  the 
different  phases  of  their  metamorphoses,  the  rapidity 
with  which  these  metamorphoses  succeed  one  another, 
and  with  which  those  commodities  that  have  gone 
through  their  metamorphoses  are  replaced  by  new  com- 
modities in  the  process  of  circulation.  We  have  seen 
that  in  the  process  of  the  determination  of  prices  the 
exchange  value  of  all  commodities  is  ideally  converted 
into  a  certain  quantity  of  gold  of  the  same  value  and 
that  the  same  amount  of  value  is  present  in  a  double 
form  in  either  of  the  isolated  acts  of  circulation  M — C 
and  C — M,  first  embodied  in  the  commodity,  and  second, 
in  gold ;  yet  gold  enjoys  the  capacity  of  a  medium  of  cir- 
culation not  by  virtue  of  its  isolated  relation  to  separate 
commodities  in  a  state  of  rest,  but  owing  to  its  active 
presence  in  the  dynamic  world  of  commodities,  viz.,  its 
function  of  expressing  the  change  of  form  of  commodi- 
ties by  its  change  of  place  and  expressing  the  rapidity  of 
their  change  of  form  by  the  rapidity  of  its  change  of 
place.  The  extent  to  which  it  is  present  in  the  sphere 
of  circulation,  i.  e.,  the  actual  quantity  of  gold  in  cir- 
culation, is  thus  determined  by  the  extent  to  which  it  is 
discharging  its  function  throughout  the  entire  process. 

The  circulation  of  money  implies  the  circulation  of 
commodities;  money  circulates  commodities  which  have 
prices,  i.  e.,  which  are  beforehand  ideally  equated  to  cer- 
tain quantities  of  gold.     In  the  determination  of  the 


—     133     — 

prices  of  commodities,  the  value  of  the  quantity  of  gold 
which  serves  as  a  unit  of  measure,  or  the  value  of  gold, 
is  assumed  to  be  given.  Under  that  assumption  the 
quantity  of  gold  necessary  for  circulation  is  determined 
first  of  all  by  the  sum  total  of  the  prices  of  commodities 
that  are  to  be  realized.  But  this  sum  is  itself  determined : 

1.  By  the  level  of  prices,  the  relatively  high  or  low  ex- 
change value  of  commodities  estimated  in  gold;  and 

2.  By  the  mass  of  commodities  circulating  at  fixed 
prices,  i.  e.  by  the  number  of  purchases  and  sales  at 
given  prices.*  If  one  quarter  of  wheat  is  worth  60 
shillings,  then  twice  as  much  gold  is  required  to  circu- 
late it  or  to  realize  its  price  as  would  be  the  case  if  it 
were  worth  only  30  shillings.  To  circulate  500  quar- 
ters of  wheat  at  60  shillings,  twice  as  much  gold  is  neces- 
sary as  for  the  circulation  of  250  quarters  at  the  same 
price.  Finally,  to  circulate  10  quarters  at  100  shillings 
only  half  as  much  money  is  necessary  as  when  circu- 

^  The  quantity  of  money  is  immaterial  "pourvu  qu'il  y  en  ait 
assez  pour  maintenir  les  prix  contractus  par  les  denr§es"  (as 
long  as  it  is  sufficient  to  maintain  the  existing  prices  of  com- 
modities).   Boisguillebert,  1.  c.  p.  210. 

"If  the  circulation  of  commodities  of  four  hundred  millions 
required  a  currency  of  forty  millions,  and  .  .  .  this  pro- 
portion of  one-tenth  was  the  due  level,  estimating  both  cur- 
rency and  commodities  in  gold ;  then,  if  the  value  of  commodi- 
ties to  be  circulated  increased  to  four  hundred  and  fifty  millions, 
from  natural  causes  ...  I  should  say  the  currency,  in 
order  to  continue  at  its  level,  must  be  increased  to  forty-five 
millions."  (William  Blake,  "Observations  on  the  Effects  Pro- 
duced by  the  Expenditure  of  Government,  etc.,*'  London,  1823, 
p.  80.) 


—     134    — 

lating  40  quarters  at  50  shillings.  It  follows  that  the 
quantity  of  gold  required  for  circulation  may  fall  in 
spite  of  a  rise  in  price,  if  the  mass  of  commodities  in  cir- 
culation declines  in  a  greater  ratio  than  the  rise  of  the 
combined  sum  of  prices ;  and,  inversely,  the  quantity  of 
the  circulating  medium  may  rise  in  spite  of  a  decline 
of  the  mass  of  commodities  in  circulation,  if  the  sum 
total  of  prices  rises  in  a  greater  ratio.  Thorough  and 
minute  English  investigations  have  demonstrated  e.  g. 
that  in  the  early  stages  of  a  dearth  of  grain  in  England 
the  quantity  of  money  in  circulation  increases,  because 
the  total  price  of  the  diminished  supply  of  grain  is 
greater  than  the  former  total  price  of  a  larger  supply  of 
grain,  while  the  circulation  of  the  other  commodities 
continues  undisturbed  for  some  time  at  their  old  prices. 
At  a  later  stage  of  the  dearth  of  grain,  there  is  a  decline 
in  the  quantity  of  circulating  money,  either  because  less 
goods  are  sold  at  old  prices  besides  grain,  or  the  same 
quantity  of  those  goods  is  sold  at  lower  prices. 

But,  as  we  have  seen,  the  quantity  of  money  in  cir- 
culation is  determined  not  only  by  the  sum  total  of  prices 
of  commodities  that  are  to  be  realized,  but  also  by  the 
rapidity  with  which  money  circulates  or  with  which  it 
completes  this  work  of  realization.  If  the  same 
sovereign  makes  ten  purchases  a  day,  each  of  a  com- 
modity having  a  price  of  one  sovereign,  and  thus  changes 
hands  ten  times,  it  does  as  much  work  as  would  be  ac- 
complished by  ten  sovereigns  each  performing  but  a 
single  act  of  circulation  a  day.*     Consequently,  rapidity 

*  **E  la  velocity  del  giro  del  danaro,  non  la  quantity  dei  metal li 
cbe  fa  apparir  molto  a  poco  il  danaro."     (Galiani,  1.  c.  p.  99.) 


—     135     — 

of  gold  circulatioa  can  make  up  for  its  quantity, 
or  the  presence  of  gold  in  the  sphere  of  circulation  is  de- 
termined not  only  by  its  presence  as  an  equivalent  of  a 
commodity  side  by  side  with  it,  but  also  by  its  partici- 
pation in  the  movement  of  metamorphoses  of  commodi- 
ties. The  rapidity  of  the  circulation  of  money,  how- 
ever, can  ser^e  as  a  substitute  for  its  quantity  only  to  a 
limited  extent,  since  at  any  given  moment  an  endless 
number  of  isolated  purchases  and  sales  takes  places  in 
different  localities. 

If  the  total  price  of  the  commodities  in  circulation 
rises,  but  in  a  smaller  ratio  than  the  increase  in  the 
rapidity  of  circulation  of  money,  the  volume  of  the  circu- 
lating medium  will  diminish.  If  on  the  contrary  the 
rapidity  of  circulation  decreases  in  a  greater  ratio  than 
the  total  price  of  the  commodities  in  circulation,  the  vol- 
imie  of  currency  will  increase.  An  increasing  volume  of 
currency  combined  with  a  general  fall  of  prices  or  a  di- 
minishing volume  of  currency  in  connection  with  a  gen- 
eral rise  of  prices  is  one  of  the  best  known  phenomena  in 
the  history  of  prices.  But  the  consideration  of  the  causes 
which  bring  about  a  simultaneous  rise  in  the  level  of 
prices  and  a  still  greater  rise  in  the  rate  of  velocity  of 
circulation  of  money,  or  the  opposite  phenomenon,  falls 
outside  of  the  sphere  of  simple  circulation.  By  way  of 
illustration,  it  may  be  mentioned  that  in  periods  of  pre- 
vailing credit,  the  rapidity  of  circulation  of  money  grows 


("It  is  the  rapidity  of  the  circulation  of  money  and  not  the 
quantity  of  metals  that  causes  a  jjreater  or  smaller  amount  of 
money  to  appear.**) 


—     136     - 

faster  than  the  prices  of  commodities,  while  in  times  of 
declining  credit  the  prices  of  commodities  fall  slower 
than  the  rapidity  of  circulation.  The  shallow  and  arti- 
ficial character  of  the  simple  circulation  of  money  is 
manifested  in  the  fact  that  all  the  elements  which  have 
a  determining  influence  on  the  volume  of  currency,  such 
as  the  volume  of  commodities  in  circulation,  prices,  the 
rise  or  fall  of  prices,  the  number  of  simultaneous  pur- 
chases and  sales,  the  rapidity  of  the  circulation  of 
money, — depend  on  the  metamorphic  process  which 
takes  place  in  the  world  of  commodities,  and  that 
again  depends  on  the  general  character  of  the  methods  of 
production,  the  size  of  population,  the  relation  between 
city  and  country,  the  development  of  the  means  of 
transportation,  the  greater  or  less  division  of  labor, 
credit,  etc.;  in  short,  on  circumstances  all  of  which  lie 
outside  of  the  sphere  of  simple  circulation  of  money  and 
are  only  reflected  in  it. 

The  rapidity  of  circulation  being  given,  the  volume 
of  currency  is  simply  determined  by  the  prices  of  com- 
modities. Hence,  prices  are  not  high  or  low,  because 
there  is  more  or  less  money  in  circulation,  but  on  the 
contrary,  there  is  more  or  less  money  in  circulation,  be- 
cause prices  are  high  or  low.  This  is  one  of  the  most 
important  laws,  whose  demonstration  in  detail  by  means 
of  the  history  of  prices  constitutes  perhaps  the  only 
merit  of  the  post-Eicardian  English  Political  Economy. 
If  experience  shows,  that  the  level  of  metallic  circula- 
tion or  the  mass  of  gold  and  silver  in  circulation  in  a 
given  country  is  subject  to  temporary  ebbs  and  tides 


—     137    — 

and  very  violent  ones  at  times/  but  on  the  whole  re- 
mains stationary  for  long  periods,  the  deviations  form- 
ing but  small  oscillations  about  the  average  level,  this 
is  explained  by  the  antagonistic  nature  of  the  circum- 
stances which  determine  the  quantity  of  money  in  circu- 
lation. Their  simultaneous  modifications  neutralize 
their  effects  and  leave  everything  where  it  was  before. 

The  law,  that  with  a  given  rapidity  of  circulation  of 
money  and  a  given  total  sum  of  prices  of  commodities 
the  quantity  of  the  circulating  medium  is  determined, 
may  also  be  expressed  as  follows.  If  the  exchange  values 
of  commodities  and  the  average  rapidity  of  their  meta- 
morphoses are  given,  the  quantity  of  gold  in  circulation 
depends  on  its  own  value.  If,  therefore,  the  value  of 
gold,  i.  e.  the  labor-time  necessary  for  its  production, 
should  rise  or  fall,  the  prices  of  commodities  will  rise 


*  An  example  of  an  extraordinary  decline  of  metallic  circula- 
tion from  its  average  level  was  furnished  by  England  in  1858, 
as  may  be  seen  from  the  following  extract  from  the  London 
Economist:  "From  the  nature  of  the  case  (namely,  the  iso- 
lated nature  of  simple  circulation)  very  exact  data  cannot  be 
procured  as  to  the  amount  of  cash  that  is  fluctuating  in  the 
market,  and  in  the  hands  of  the  not  banking  classes.  But, 
perhaps,  the  activity  or  the  inactivity  of  the  mints  of  the  great 
commercial  nations  is  one  of  the  most  likely  indications  in 
the  variations  of  that  amount.  Much  will  be  manufactured 
when  it  is  wanted;  and  little  when  little  is  wanted.  .  .  . 
At  the  English  mint  the  coinage  was  in  1855  £9,245,000;  1856, 
£6,476,000;  1857,  £5,293,855.  During  1858  the  mint  had 
scarcely  anything  to  do."  (Economist,  July  10,  1858.)  But 
at  the  same  time  about  eighteen  million  pounds  sterling  were 
lying  in  the  bank  vaults. 


—    1S8    — 

or  fall  in  inverse  ratio,  and  corresponding  to  that  rise  or 
fall  of  prices,  the  rapidity  of  circulation  remaining  the 
same,  a  larger  or  smaller  quantity  of  gold  would  be  re- 
quired to  keep  the  same  volume  of  commodities  in  cir- 
culation. The  same  change  would  occur,  if  the  old 
standard  of  value  were  superseded  by  a  more  or  less 
valuable  metal.  Thus,  Holland  required  from  fourteen 
to  fifteen  times  as  much  silver  as  it  had  previously  re- 
quired gold,  in  order  to  circulate  the  same  volume  of  com- 
modities, when  out  of  tender  regard  for  the  government 
creditors  and  out  of  fear  of  the  effects  of  the  discoveries 
in  California  and  Australia  it  substituted  silver  for  gold 
money. 

From  the  fact  that  the  quantity  of  gold  in  circulation 
depends  on  the  variable  sum  total  of  prices  of  commodi- 
ties and  the  varying  rapidity  of  circulation,  it  follows 
that  the  volume  of  the  circulating  medium  must  be 
capable  of  contraction  and  expansion;  in  short,  that 
according  to  the  requirements  of  circulation,  gold  must 
now  enter,  now  leave  the  sphere  of  circulation  in  its 
capacity  of  a  medium  of  circulation.  How  the  circula- 
tion process  itself  realizes  these  conditions,  we  shall  see 
later  on. 

C.    COIN  AND  SYMBOLS  OF  VALUE. 

In  its  capacity  of  a  medium  of  circulation,  gold  ac- 
quires a  shape  of  its  own,  it  becomes  coin.  In  order  to 
prevent  any  technical  difficulties  in  the  way  of  its  circu- 
lation, it  is  coined  according  to  the  standard  of  the 
money  of  account.  Gold  pieces  whose  imprints  and 
legends  show  that  they  contain  certain  weights  of  gold 


—     139     — 

corresponding  to  the  reckoning  names  of  money,  £, 
8.,  etc.,  are  coins.  The  establishment  of  a  mint-price,  as 
well  as  the  technical  work  of  coining,  are  the  business 
of  the  state.  Both  as  money  of  account  and  as  coin, 
money  acquires  a  local  and  political  character;  it  speaks 
different  languages  and  wears  different  national  uni- 
forms. The  sphere  in  which  money  circulates  as  coin, 
is  distinguished  as  an  internal  sphere  of  circulation 
which  is  separated  from  the  universal  sphere  of  circula- 
tion in  the  commodity  world  by  national  boundaries. 

Yet,  the  only  difference  between  gold  bullion  and  gold 
coin  is  that  between  coin  denomination  and  weight  de- 
nomination. What  seems  to  be  a  difference  in  name  in 
the  latter  case  appears  as  a  difference  in  shape  in  the 
former.  Qold  coin  can  be  thrown  into  the  melting-pot. 
and  thus  be  converted  again  into  gold  sans  phrase,  just 
as,  on  the  contrary,  gold  bars  only  have  to  be  sent  to 
the  mint  to  receive  the  shape  of  coins.  The  conversion 
and  reconversion  from  one  form  into  another  appears  to 
be  a  purely  technical  matter. 

For  100  pounds  or  1200  ounces  troy  of  22  carat  gold 
one  can  get  £4,672^  or  gold  sovereigns  at  the  English 
mint ;  if  these  sovereigns  be  put  on  one  side  of  the  weigh- 
ing scale  and  one  hundred  pounds  of  gold  bullion  on  the 
other,  the  two  will  balance  each  other,  which  proves  that 
the  sovereign  is  nothing  but  a  piece  of  gold  of  certain 
weight  bearing  this  name  in  English  coinage  and  hav- 
ing a  shape  and  stamp  of  its  own.  The  4,672  >^ 
sovereigns  are  put  into  circulation  at  different  points, 
and  once  iu  its  grasp  they  make  a  certain  number  of 
moves  per  day,  some  sovereigns  more,  others  less.  If  the 


—    140    — 

average  number  of  moves  per  day  of  each  ounce  be  ten, 
the  1200  ounces  of  gold  would  realize  12,000  ounces  or 
46,725  sovereigns  as  the  total  price  of  commodities. 
You  may  turn  and  toss  an  ounce  of  gold  in  any  way  you 
like,  and  it  will  never  weigh  ten  ounces.  But  here  in  the 
process  of  circulation  one  ounce  practically  does  weigh 
ten  ounces.  The  work  performed  by  a  coin  in  the  sphere 
of  circulation  is  equivalent  to  the  quantity  of  gold  it 
contains  multiplied  by  the  number  of  its  moves.  Be- 
sides the  actual  importance  which  a  coin  possesses  by 
virtue  of  its  being  an  individual  piece  of  gold  of  a  def- 
inite weight,  it  acquires  an  ideal  significance  due  to  its 
function.  But  whether  the  sovereign  circulates  once  or 
ten  times,  in  each  particular  purchase  or  sale  it  acts 
only  as  one  sovereign.  It  is  like  a  general  who  by  timely 
appearance  at  ten  different  points  on  the  battle  field 
does  the  work  of  ten  generals,  but  still  remains  the  same 
identical  general  at  each  point.  The  idealization  of  the 
means  of  circulation  which  is  due  to  the  supplanting  of 
quantity  by  rapidity  in  money  circulation,  affects  only 
the  function  of  the  coin  within  the  sphere  of  circulation, 
but  not  the  nature  of  the  individual  coin. 

The  circulation  of  money  is  a  movement  through 
the  outside  world,  and  the  sovereign,  though  it  non 
oUt,  keeps  rather  mixed  company.  In  the  course 
of  its  friction  against  all  kinds  of  hands,  pouches, 
pockets,  purses,  money-belts,  bags,  chests  and  strong- 
boxes, the  coin  rubs  off,  loses  one  gold  atom  here 
and  another  one  there  and  thus,  as  it  wears  off 
in  its  wanderings  over  the  world,  it  loses  more 
and  more  of  its  intrinsic  substance.      By  being  used 


—     141     — 

it  gets  used  up.  Let  us  take  up  a  sovereign  at 
the  moment  when  its  natural,  inborn  character  has 
been  slightly  affected.  A  baker,  says  Dodd,^  who  receives 
from  the  bank  to-day  a  brand  new  sovereign  and  pays  it 
to-morrow  to  the  miller,  does  not  pay  the  same  veritable 
sovereign;  the  latter  has  become  lighter  than  it  was  at 
the  time  he  received  it.  It  is  clear,  says  an  anonymous 
writer/  that  in  the  very  nature  of  things,  coins  must  de- 
preciate one  by  one  as  a  result  of  ordinary  and  unavoid- 
able friction.  It  is  a  physical  impossibility  to  entirely 
exclude  light  coins  from  circulation  at  any  time,  even 
for  one  day.  Jacob  estimates  that  of  the  380  million 
pounds  sterling  which  were  in  existence  in  Europe  in 
1809,  nineteen  million  pounds  sterling  entirely  disap- 
peared by  1829,  i.  e.,  within  a  period  of  twenty  years.^ 
Thus,  while  a  commodity  at  its  first  step  into  the 
sphere  of  circulation,  falls  out  of  it,  a  coin,  after 
a  couple  of  steps  within  that  sphere  represents    more 

*  Dodd,  "Curiosities  of  Industry,"  etc.,  London,  1854. 

'"The  Currency  Question  Reviewed,  etc.,  by  a  Banker.'* 
(Edinburgh,   1845,  p.  69.) 

"Si  UB  6cu  un  peu  us6  etait  repute  valoir  quelque  chose  de 
moins  qu'un  ^u  tout  neuf,  la  circulation  se  trouverait  contin- 
uellement  arret€e,  et  il  n'y  aurait  pas  un  seul  payement  qui 
ne  fut  matiSre  i  contestation."  (G.  Gamier,  1.  c.  t.  I.,  p.  24.) 
("If  an  ecu  slightly  used  would  pass  for  a  little  less  than  an 
entirely  new  ecu,  circulation  would  be  continually  interfered 
with,  and  not  a  payment  would  take  place  that  would  not  give 
rise  to  controversy.") 

•W.  Jacob,  "An  Inquiry  Into  the  Production  and  Consump- 
tion of  the  Precious  Metals."  (London,  1831,  vol.  II.,  ch. 
XXVL) 


—     142     — 

metal  than  it  actually  contains.  The  longer  a 
coin  remains  in  circulation,  the  rapidity  of  circu- 
lation remaining  the  same,  or  the  greater  its  rapid- 
ity of  circulation  within  the  same  period  of  time,  the 
greater  the  discrepancy  between  its  form  as  coin  and  its 
actual  gold  or  silver  substance.  What  remains  is  magni 
nominis  umbra.  The  body  of  the  coin  becomes  but  a 
shadow.  If  at  first  it  became  heavier  through  the 
process  of  circulation,  it  now  becomes  lighter  on  account 
of  it,  but  continues  to  represent  the  original  quantity 
of  gold  in  each  single  purchase  or  sale.  The  sovereign, 
as  a  fictitious  sovereign,  as  fictitious  gold,  continues  to 
perform  the  function  of  a  legitimate  coin.  While  other 
beings  lose  their  idealism  in  contact  with  the  outer  world, 
the  coin  is  idealized  by  practice,  being  gradually  trans- 
formed into  a  mere  phantom  of  its  golden  or  silver  body. 
This  second  idealization  of  metal  money  springing  from 
the  very  process  of  circulation,  or  from  the  discrepancy 
between  its  nominal  weight  and  its  real  weight  is  ex- 
ploited in  all  kinds  of  coin  counterfeiting  practiced 
partly  by  governments,  partly  by  private  adventurers. 
The  entire  history  of  coinage  from  the  beginning  of  the 
middle  ages  until  late  in  the  eighteenth  century  is  noth- 
ing but  a  history  of  these  two-fold  and  antagonistic  adul- 
terations, and  Custodies  voluminous  collection  of  writ- 
ings of  Italian  economists  turns  mostly  about  this  point. 
But  the  fictitious  importance  of  gold  due  to  its  func- 
tion, comes  in  conflict  with  its  real  substance.  One  gold 
coin  has  lost  more,  another,  less  of  its  metal  substance 
in  the  course  of  circulation,  and  one  of  them  is,  as  a 
matter  of  fact,  worth  more  now  than  the  other.     But 


—    143    — 

since  in  the  discharge  of  their  function  of  coins  they 
are  taken  at  the  same  value,  the  sovereign  weighing  a 
quarter  of  an  ounce  passing  for  no  more  than  the  sov- 
ereign which  only  stands  for  a  quarter  of  an  ounce,  the 
full-weight  sovereigns  are  subjected  in  the  hands  of  un- 
scrupulous owners  to  surgical  operations  which  produce 
artificially  what  the  circulation  process  has  caused  in  a 
natural  way  to  their  more  light-weighted  brothers.  They 
are  clipped  and  reduced  and  the  superfluous  gold  fat 
lands  in  the  melting  pot.  If  4,672^^  gold  sovereigns 
when  put  on  one  side  of  the  weighing  scale  weigh  on  an 
average  only  800  ounces  instead  of  1200,  they  will  buy 
when  brought  to  the  gold  market  only  800  ounces  of 
gold ;  that  is,  the  market  price  of  gold  would  rise  above 
its  mint  price.  Every  coin,  even  if  of  full  weight  would 
pass  in  its  mint  form  for  less  than  in  bullion  form.  The 
full  weight  sovereigns  would  be  reconverted  into  bullion, 
a  form  in  which  a  greater  quantity  of  gold  is  always 
worth  more  than  a  smaller  quantity.  As  soon  as  this 
decline  of  metallic  weight  would  affect  a  sufficiently 
large  number  of  sovereigns  to  bring  about  a  permanent 
rise  of  the  market  price  of  gold  above  its  mint  price,  the 
reckoning  names  of  the  coins,  though  remaining  the 
same,  would  begin  to  denote  a  smaller  quantity  of  gold. 
That  is  to  say,  the  standard  of  money  would  change 
and  gold  would  be  coined  in  the  future  according  to  this 
new  standard.  By  virtue  of  its  idealization  as  a 
medium  of  circulation,  gold  would  react  upon  and 
change  the  legally  determined  ratios  under  which  it  acted 
as  the  standard  of  price.  The  same  revolution  would  be 
repeated  after  a  certain  length  of  time  and  thus  gold 


—     144    — 

would  be  subject  to  constant  change  both  as  a  standard 
of  price  and  as  a  medium  of  circulation,  a  change  under 
one  of  these  forms  leading  to  a  change  under  the  other 
and  vice  versa.  This  explains  the  phenomenon  men- 
tioned above,  namely  that  in  the  history  of  all  modem 
nations  the  same  money-name  stands  for  a  constantly 
diminishing  quantity  of  metal.  The  contradiction  be- 
tween gold  as  coin  and  gold  as  standard  of  price  be- 
comes also  one  between  gold  as  coin  and  gold  as  the 
imiversal  equivalent;  in  the  latter  capacity  it  circulates 
not  only  within  the  limits  of  national  boundaries,  but 
in  the  world  market.  As  a  measure  of  value  gold  was 
always  of  full  weight,  because  it  served  only  as  ideal  gold. 
In  its  capacity  of  equivalent  in  the  isolated  transaction 
C — M  it  passes  at  once  from  a  state  of  motion  to  a  state 
of  rest ;  but  in  its  capacity  of  coin  its  natural  substance 
comes  in  constant  conflict  with  its  function.  The  trans- 
formation of  the  gold  sovereign  into  fictitious  gold  can 
not  be  wholly  avoided,  but  legislation  seeks  to  prevent 
its  unlimited  circulation  as  coin  by  prescribing  its  with- 
drawal from  circulation  as  soon  as  its  shortage  of  metallic 
substance  reaches  a  certain  degree.  According  to  the 
English  law,  e.  g.,  a  sovereign  which  lacks  more  than 
0.747  grains  of  its  weight  ceases  to  be  legal  tender.  The 
Bank  of  England  which  weighed  forty-eight  million  gold 
sovereigns  in  the  short  period  between  1844  and  1848, 
possesses  in  Mr.  Cotton's  gold  weighing  scale  a  machine 
which  not  only  detects  a  difference  of  1-100  part  of  a 
grain  between  two  sovereigns,  but  like  a  sensible  being, 
immediately  throws  out  the  light-weight  coin  on  a  board 


—     145     — 

where  it  lands  under  another  machine  which  cuts  it  up 
with  oriental  cruelty. 

That  being  the  case,  gold  coins  could  not  circulate 
at  all  were  not  their  circulation  confined  to  definite 
spheres  in  which  they  do  not  wear  off  so  rapidly.  In  so 
far  as  a  gold  coin  weighing  only  one-fifth  of  an  ounce 
passes  in  circulation  for  a  quarter  of  an  ounce  of  gold, 
it  is  practically  merely  a  sign  or  a  symbol  for  one- 
twentieth  of  an  ounce  of  gold,  and  in  that  way  all  gold 
coins  are  transformed  by  the  very  process  of  circula- 
tion into  more  or  less  of  a  mere  sign  or  symbol  of  their 
substance.  But  no  thing  can  be  its  own  symbol.  Painted 
grapes  are  no  symbol  of  real  grapes,  they  are  imaginary 
grapes.  Still  less  can  a  light-weight  sovereign  be  a  sym- 
bol of  a  full-weighted  one,  just  as  a  lean  horse  can  not 
serve  as  a  s3mibol  of  a  fat  one.  Since  gold  thus  be- 
comes a  symbol  of  its  own  self,  but  at  the  same  time  can 
not  serve  in  that  capacity,  it  receives  a  symbolical,  silver 
or  copper  substitute  in  those  spheres  of  circulation  in 
which  it  is  most  subject  to  wear  and  tear,  namely  where 
purchases  and  sales  are  constantly  taking  place  on  the 
smallest  scale.  In  these  spheres,  even  if  not  the  same 
identical  coins,  still  a  certain  part  of  the  entire  supply 
of  gold  money  would  constantly  circulate  as  coin.  To 
that  extent  gold  is  substituted  by  silver  or  copper  tokens. 
Thus,  while  only  a  specific  commodity  can  perform 
in  a  given  country  the  function  of  a  measure  of  value  and 
therefore  of  money,  different  commodities  can  serve  as 
coin  side  by  side  with  gold.  These  subsidiary  mediums 
of  circulation,  such  as  silver  or  copper  coins,  represent 
definite  fractions  of  a  gold  coin  within  the  sphere  of  cir- 


—     146     — 

eulation.  Their  own  silver  or  copper  weight  is,  there- 
fore, not  determined  by  the  proportions  of  the  respective 
values  of  silver  and  copper  to  that  of  gold,  but  is  ar- 
bitrarily fixed  by  law.  They  may  be  issued  only  in  such 
quantities  in  which  the  diminutive  fractions  of  gold  coin 
which  they  represent  would  constantly  circulate  either 
for  purposes  of  change  for  gold  coins  of  higher  denomina- 
tions, or  for  realizing  equally  small  prices  of  commodi- 
ties. In  retail  trade  silver  and  copper  tokens  belong  to 
distinct  spheres  of  circulation.  In  the  nature  of  things, 
the  rapidity  of  their  circulation  is  in  inverse  ratio  to 
the  price  which  they  realize  in  each  separate  purchase  or 
sale,  or  to  the  size  of  the  fraction  of  gold  coin  which 
they  represent.  If  we  consider  how  immense  the  volume 
of  the  daily  retail  trade  in  a  country  like  England  is, 
we  will  understand  from  the  comparatively  insignificant 
proportions  of  its  combined  volume  how  rapid  and  steady 
the  circulation  of  the  subsidiary  coin  must  be.  From  a 
parliamentary  report  of  recent  date  we  see,  e.  g.,  that  in 
1857  the  English  mint  coined  £4,859,000  worth  of  gold, 
£733,000  of  silver  nominal  value  which  contained  metal 
actually  worth  £363,000.  The  total  amount  of  gold 
coined  in  the  ten  years  ending  December  31,  1857,  was 
£65,239,000,  and  of  silver  only  £2,434,000.  The  sup- 
ply of  copper  coin  in  1857  amounted  only  to  £6,720 
nominal  value  containing  £3,492  worth  of  copper;  of 
this  £3,136  was  in  pennies,  £2,464  in  half-pennies,  and 
£1,120  in  farthings.  The  total  value  of  copper  coined 
in  the  ten  years  was  £141,477  nominal,  the  metallic 
value  being  £73,503.  Just  as  gold  coin  is  prevented 
from  permanently  retaining  its  function  of  coin  by  the 


—     147     — 

legal  provision  of  the  loes  of  weight  which  demonetizes 
it,  so  are  the  silver  and  copper  tokens  prevented  from 
passing  from  their  spheres  of  circulation  into  that  of 
gold  coin  and  acquiring  the  character  of  money  by  the 
provision  of  the  maximum  amount  for  which  they  are 
legal  tender.  In  England  e.  g.  copper  is  legal  tender 
only  to  the  amount  of  six  pence  and  silver  up  to  forty 
shillings.  If  silver  and  copper  tokens  were  to  be  issued 
in  greater  quantities  than  the  requirements  of  their 
spheres  of  circulation  call  for,  prices  of  commodities 
would  not  rise  as  a  result,  but  the  accumulation  of  these 
tokens  in  the  hands  of  retail  dealers  would  reach  such  an 
extent  that  they  would  be  finally  compelled  to  sell  them 
as  metal.  Thus  in  1798  English  copper  coins,  issued  by 
private  individuals,  accumulated  in  the  hands  of  small 
traders  to  the  amount  of  £20,350  which  they  tried  in 
vain  to  put  again  in  circulation,  being  finally  compelled 
to  throw  them  as  metal  on  the  copper  market* 

The  silver  and  copper  tokens  which  represent  gold 
coin  in  certain  spheres  of  circulation  in  the  interior  of 
the  country,  contain  a  definite  quantity  of  silver  and 
copper  prescribed  by  law,  but  after  they  get  into  circula- 
tion, they  wear  off  like  gold  coins  and  become  even  more 
rapidly  mere  phantoms,  according  to  the  rapidity  and 
steadiness  of  their  circulation.  To  draw  again  a  line 
of  demonetization  beyond  which  silver  and  copper  tokens 
would  lose  their  character  of  coins,  they  would  have  to  b^ 

*  David  Buchanan,  "Observations  on  the  Subjects  Treated  of 
in  Dr.  Smith's  Inquiry  on  the  Wealth  of  Nations,"  etc  (Edin- 
burgh, 1841,  p.  3.) 


—     148     — 

replaced  in  turn  within  certain  spheres  of  their  own 
circulation  by  some  other  symbolic  money,  say  iron 
and  lead,  and  such  representation  of  one  kind  of  sym- 
bolic money  by  another  kind  would  form  an  endless 
process.  In  all  countries  with  a  well  developed  cir- 
culation the  very  requirements  of  money  circulation 
make  it  necessary  that  the  character  of  silver  and 
copper  tokens  as  money  be  made  independent  of  any 
loss  of  weight  in  those  coins.  Thus,  as  it  was  in  the 
nature  of  things,  it  appears  that  they  serve  as  sym- 
bols of  gold  coin  not  because  they  are  symbols  made 
of  silver  or  copper,  not  because  they  have  certain 
value,  but  only  in  so  far  as  they  have  no  value. 

Relatively  worthless  things,  such  as  paper,  can  con- 
sequently perform  the  function  of  symbols  of  gold 
money.  That  subsidiary  currency  consists  of  metal 
tokens,  such  as  silver,  copper,  etc.,  is  mainly  due  to 
the  fact  that  in  most  countries  the  less  valuable  metals 
such  as  silver  in  England,  copper  in  ancient  Rome, 
Sweden,  Scotland,  etc.,  had  circulated  as  money  be- 
fore they  were  degraded  by  the  process  of  circulation 
to  the  rank  of  small  change  and  replaced  by  a  more 
precious  metal.  Besides,  it  is  natural  that  the  money 
symbol  which  grows  directly  out  of  metallic  circula- 
tion, should  itself  be  a  metal.  Just  as  that  portion 
of  gold  which  would  always  have  to  circulate  as  small 
change,  is  replaced  by  metal  tokens ;  so  can  the  other 
portion  of  gold  which  is  constantly  absorbed  as  coin 
by  circulation  in  the  interior  of  the  country  and, 
therefore,  must  continually  circulate,  be  replaced  with 
worthless  tokens.  The  level  below  which  the  mass  of 
circulating  coin   never  sinks   is  determined   in   each 


—     149     — 

country  by  experience.  Thus,  the  originally  imper- 
ceptible difference  between  the  nominal  weight  and 
the  metallic  weight  of  a  metal  coin  can  grow  apace 
until  it  reaches  the  point  of  absolute  separation.  The 
mint  name  of  money  parts  company  with  its  substance 
and  exists  outside  of  it  in  worthless  slips  of  paper. 
Just  as  the  exchange  value  of  commodities  is  crystal- 
lized by  their  process  of  exchange  into  gold  money, 
so  is  gold  money  sublimated  in  its  currency  into  its 
own  symbol  first  in  the  form  of  worn  coin,  then  in 
the  form  of  subsidiary  metal  currency,  and  finally  in 
the  form  of  a  worthless  token,  paper,  mere  sign  of 
value. 

Gold  coin  has  produced  its  substitutes,  first  metallic 
and  then  paper,  only  because  in  spite  of  its  loss  of 
metallic  weight  it  continued  to  perform  the  function  of 
coin.  It  did  not  circulate  because  of  its  wear  and 
tear ;  on  the  contrary,  it  wore  out  to  a  symbol  because 
it  continued  to  circulate.  Only  in  so  far  as  gold 
money  becomes  simply  a  token  of  its  own  value  in  the 
process  of  circulation,  can  mere  tokens  of  value  take 
its  place. 

In  so  far  as  the  movement  C — M — C  represents  a 
dynamic  unity  of  two  processes  C — M  and  M — C 
which  pass  directly  one  into  the  other,  or  in  so  far  as 
a  commodity  passes  through  the  complete  process  of 
its  metamorphosis,  it  express  its  exchange  value  in 
price  and  in  money  only  to  discard  that  form  at  once 
and  to  become  again  a  commodity  or,  rather,  a  use- 
value.  That  is  to  say,  it  develops  only  an  apparent 
assertion  of  the  independence  of  its  exchange  value- 
On  the  other  hand,  we  have  seen  that  gold,  in  so  far 
as  it  performs  the  function  of  coin  or  in  so  far  as  it 


—    150    — 

continually  circulates,  actually  forms  only  a  connect- 
ing link  between  the  metamorphoses  of  commodities 
and  constitutes  but  tlteir  transitory  money  form; 
furthermore,  that  it  realizes  the  price  of  one  set  of 
commodities  only  in  order  to  realize  that  of  another, 
but  in  no  case  does  it  constitute  a  stable  form  of  ex- 
change value  or  appear  itself  as  a  commodity  in  a 
state  of  rest.  The  reality  which  the  exchange  value 
of  commodities  acquires  in  the  process  and  which  is 
represented  by  gold  in  its  circulation,  is  the  reality  of 
an  electric  spark.  Although  real  gold,  it  plays  the 
part  of  fictitious  gold,  and  can,  therefore,  be  replaced 
in  this  function  by  a  token  of  itself. 

The  token  of  value,  say  paper,  which  plays  the  part 
of  coin,  is  the  token  of  a  quantity  of  gold  expressed 
in  its  currency  name,  i.  e.,  it  is  a  gold  token.  Just 
as  a  certain  quantity  of  gold  does  not  in  itself  express 
a  value  ratio,  so  is  that  true  of  the  token  which  takes 
its  place.  In  so  far  as  a  certain  quantity  of  gold,  as 
embodied  labor-time,  has  a  value  of  a  certain  magni- 
tude, the  gold  token  represents  value.  But  the  mag- 
nitude of  the  value  which  it  represents  depends  all 
the  time  on  the  value  of  the  quantity  of  gold  for 
which  it  stands.  As  regards  commodities  the  token 
of  value  expresses  the  reality  of  their  price,  it  is  sig- 
num  pretii  and  sign  of  their  value  only  because  their 
value  is  expressed  in  their  price.  In  the  process  C — 
M — C,  in  so  far  as  it  represents  the  dynamic/  unity 
or  direct  alternation  of  the  two  metamorphoses — and 
that  is  the  aspect  it  assumes  in  the  sphere  of  circula- 
tion in  which  the  token  of  value  discharges  its  func- 
tion— the  exchange  value  of  commodities  acquires  in 


—    161    — 

price  only  an  ideal  expression  and  in  money  only  an 
ima^nary  symbolic  existence.  Exchange  value  thus 
acquires  only  an  imaginary  though  material  expres- 
sion, but  it  has  no  real  existence  except  in  the  com- 
modities themselves,  in  so  far  as  a  certain  quantity 
of  labor-time  is  embodied  in  them.  It  appears,  there- 
fore, that  the  token  of  value  represents  directly  the 
value  of  commodities,  by  figuring  not  as  a  token  of 
gold  but  as  a  token  of  the  value  which  exists  in  the 
commodity  alone  and  is  only  expressed  in  price.  But 
it  is  a  false  appearance.  The  token  of  value  is  di- 
rectly only  a  token  of  price,  i.  e.,  a  token  of  gold,  and 
only  indirectly  a  token  of  value  of  a  commodity. 
Unlike  Peter  Shlemihl,  gold  has  not  sold  its  shadow, 
but  buys  with  its  shadow.  The  token  of  value  oi>er- 
ates  only  in  so  far  as  it  represents  the  price  of  one 
commodity  as  against  that  of  another  within  the 
sphere  of  circulation,  or  in  so  far  as  it  represents  gold 
to  every  owner  of  commodities.  A  certain  compara- 
tively worthless  object  such  as  a  piece  of  leather,  a 
slip  of  paper,  etc.,  becomes  by  force  of  custom  a 
token  of  money  material,  but  maintains  its  existence 
in  that  capacity  only  so  long  as  its  character  as  a  sym- 
bol of  money  is  guaranteed  by  the  general  acquies- 
cence of  the  owners  of  commodities,  i.  e.,  so  long  as 
Tt  enjoys  a  legally  established  conventional  existence 
and  compulsory  circulation.  Paper  money  issued  by 
the  state  and  circulating  as  legal  tender  is  the  per- 
fected form  of  the  token  of  value,  and  the  only  form 
of  paper  money,  which  has  its  immediate  origin  in 
metallic  circulation  or  even  in  the  simple  circulation 
of  commodities.  Credit  money  belongs  to  a  higher 
sphere  of  the  social  process  of  production  and  is  gov- 


—    152    — 

erned  by  entirely  different  laws.  Symbolic  paper 
money  does  not  in  fact,  differ  in  the  least  from  sub- 
sidiary metal  coin,  except  that  it  reaches  wider 
spheres  of  circulation.  We  have  seen  that  the  mere 
technical  development  of  the  standard  of  price  or  of 
the  mint  price  and  later  the  shaping  of  gold  bullion 
into  coin  have  called  forth  the  interference  of  the 
state;  this  circumstance  brought  about  a  visible  sep- 
aration of  national  circulation  from  the  world  circula- 
tion of  commodities;  this  separation  is  completed  by 
the  evolution  of  coin  into  a  token  of  value.  As  a 
mere  medium  of  circulation  money  can  assume  an  in- 
dependent existence  only  within  the  sphere  of  na- 
tional circulation. 

Our  presentation  has  shown  that  the  coin  form  of 
gold  as  a  token  of  value  differentiated  from  the  gold 
substance  itself,  has  its  direct  origin  in  the  process  of 
circulation  and  not  in  any  agreement  or  state  inter- 
ference. Russia  offers  a  striking  example  of  the 
natural  origin  of  the  token  of  value.  At  the  time 
when  hides  and  furs  played  there  the  part  of  money, 
the  conflict  between  the  perishable  and  bulky  nature 
of  the  material  and  its  function  as  a  medium  of  cir- 
culation resulted  in  the  custom  of  replacing  it  by  small 
pieces  of  stamped  leather  which  thus  became  a  kind 
of  draft  payable  in  hides  and  furs.  Later  on  they 
became  under  the  name  of  copecs  mere  tokens  for 
fractions  of  the  silver  rouble  and  remained  in  use  in 
some  parts  until  1700,  when  Peter  the  Great  ordered 
their  withdrawal  in  exchange  for  small  copper  coins 

*  Henry  Storch,  *'Cours  d^Eoonomic  Politique,*'  etc.,  avec  des 
notes  par  J.  B  Say.    Paris,  1823,  torn.  IV.,  p.  179.  Storch  pub- 


—     153     — 

issued  by  the  state.  Ancient  writers  who  could 
observe  the  phenomena  of  exclusively  metallic  circu- 
lation, already  took  the  view  of  coin  as  a  symbol  or 
token  of  value.  That  is  true  both  of  Plato^  and  Aris- 
totle*    In  countries  where  credit  is  not  developed, 

lished  his  work  in  French  at  St.  Petersburg.  J.  B.  Say  imme- 
diately issued  a  Parisian  reprint,  supplemented  with  alleged 
**notes,"  which  as  a  matter  of  fact  contain  nothing  but  com- 
monplaces. Storch  (see  his  "Considerations  sur  la  Nature  du 
Revenue  National,"  Paris,  1824)  took  by  no  means  kindly  to 
this  annexation  of  his  work  by  the  "prince  de  la  science.'* 

^Plato  de  Rep.  L.  H  "vdiitoiAa  ^uiaCoXov  t^s  iXkafnq.'T^onej 
symbol  of  exchange.")  Opera  omnia,  etc.,  ed.  G.  Stallbumius, 
London,  1850,  p.  304.  Plato  develops  money  only  in  two  ca- 
pacities— as  a  measure  of  value  and  a  token  of  value,  but  de- 
mands, in  addition  to  the  token  of  value  serving  for  home  cir- 
culation, another  one  for  trade  between  Greece  and  foreign 
countries.     (See  also  Book  V  of  his  Laws.) 

'Aristotle,  Ethic.  Nicom,  1.  5.,  ch.  8,  1.  c:  olov  8*  6xAXXcrr{A« 
xriq  %pe{a<;  xb  v6txt  jpia  yiyoy^  xccrd  ffuv6TQXT}v*  xoA  8t<i  touto  Touvo^ia  Ixei 
v6;&ta[jia.  Sti  o5  yiaet  dXXdk  vd^itp  la-rl,  xcd  i(f*  fiixtv  {xeraSaXstv  xal  «ot- 
fidoa  dfxPiQ^ov*'*  ^"^^  *^^  satisfaction  of  wants  money  became 
the  medium  of  exchange  by  agreement.  And  for  that  reason 
it  bears  the  name  v6{xto{xa,  because  it  owes  its  existence,  not  to 
nature,  but  to  law  (  v6ikj>  ),  and  ti  is  in  our  power  to 
change  it  and  make  it  void.")  Aristotle  had  a  far  more 
comprehensive  and  deep  view  of  money  than  Plato.  In 
the  following  passage  he  beautifully  shows  how  barter  be- 
tween different  communities  creates  the  necessity  of  as- 
signing the  character  of  money  to  a  specific  commodity,  i.  e.. 
one  which  has  itself  an  intrinsic  value.* 'Sgytxtdtipa?  ydp  Yevo{xiv»}<; 
Tij?  PoTjOeta^  t^  tla&ye<sBat  &v  evSset?  xal  Ixx^i&xecv  &v  exXe6va^ov,  e? 
ivdyxTj?  ij  to5  yo^iayLCtzQ<^  exoptoOi}  xpfi<nq*  8tb  «pb?  Tdg  aXXayck?  TOt- 
out6v  ti  ffuveOevTO  xpb^  ff9a<;  auTo5<;  StSovat  xal  XaqjiSavscv,  8  xQv  XM* 
(7((A(i>y  otOxb  6v  tlx8  TT^v  xpefav  e6[i£xocxe(giaxov...  olov  cf8T}po?  xod  5pYo- 
po?  x5v  ei  Tt  TotouTov  iTepov".  (Arist.  De  Republioa,  L  4?  *. 
9,   [sees.  7,  8]  1.  c.) 


—    154    — 

as  e.  g".  in  China,  legal  tender  paper  money  is  found 
at  an  early  date.*.  Early  advocates  of  paper  money 
expressely  point  out  the  fact  that  metallic  coin  is 
transformed  into  a  token  of  value  in  the  very  process 

("When  the  inhabitants  of  one  country  became  more  de- 
pendent on  those  of  another,  and  they  imported  what  they 
needed  and  exported  the  sui-plns,  money  necessarily  came  into 
use  .  .  .  and  hence  men  agreed  to  employ  in  their  deal- 
ings with  each  other  something  which  was  intrinsically  useful 
and  easily  applicable  to  the  purposes  of  life,  for  example,  iron, 
silver  and  the  like."  Trans,  by  B.  Jowett,  "The  Politics  of  Ar- 
istotle, Oxford,  1885,  p.  16).  This  passage  is  quoted  by  Mdchel 
Chevalier,  who  either  has  not  read  Aristotle  or  did  not  under- 
stand him,  to  prove  that  in  Aristotle's  opinion  currency  must 
consist  of  a  substance  having  intrinsic  value.  On  the  contrary, 
Aristotle  says  expressly  that  money  as  a  mere  medium  of  cir- 
culation seems  to  owe  its  existence  to  agreement  or  law,  as  is 
shown  by  its  name  v6iJLioi&a)  and  that  in  reality  it  owes  its 
utility  as  coin  to  its  function  and  not  to  any  intrinsic  use- 
value  of  its  own.  X^po^  elvat  Soxet  xh  v6(i.to|i,a  xal  v6pL0C  xorvrdrwaot, 
fOffet  h'  o6Siv  Zxi  (AETaOe  tvuv  t«  tuv  xp(0(jlsvo>v  oOScvb^  df^tov  o5SI 
2jp^at\u»'»  Tpbc  o68lv  x&v  dvaYxafwv  *ct(*  ("Others  maintain  that 
coined  money  is  a  mere  sham,  a  thing  not  natural,  but  conven- 
tional only,  which  would  have  no  value  or  use  for  any  of  the 
purposes  of  daily  life  if  another  commodity  were  substituted 
by  the  users."  (1.  c.  sec.  11.) 

'Mandeville,  Sir  John,  "Voyages  and  Travels,"  London, 
1705,  p.  105:  "This  Emperor  (of  Cattay  or  China)  may  dis- 
pende  ols  muche  as  he  wile  withouten  estymacion.  For  he 
despendethe  not,  nor  makethe  no  money,  but  of  lether  em- 
predeth,  or  of  papyre.  And  when  that  money  hathe  ronne  so 
longe  that  it  begynethe  to  waste,  than  men  beren  it  to  the 
Emperoure  Tresorye,  and  then  they  taken  newe  Money  for 
the  old.  And  that  money  gothe  thorghe  out  all  the  contree, 
and  thorge  out  all  his  Provynces.     .  They  make  no 

money  nouther  of  Gold  nor  of  Sylver,"  and  "therefore,"  thinks 
Handeville,  "be  may  despende  ynew  and  outrageously." 


—    155     — 

of  circulation.     So  Benjamin   Franklin*  and  Bishop 
Berkeley.' 

How  many  reams  of  paper  cut  up  into  bills  can  cir- 
culate as  money  ?  Put  in  that  way,  the  question  would 
be  absurd.  The  worthless  tokens  are  signs  of  value 
only  in  so  far  as  they  represent  gold  within  the  sphere 
of  circulation  and  they  represent  it  only  to  the  ex- 
tent to  which  it  would  itself  be  absorbed  as  coin  by 
the  process  of  circulation ;  this  quantity  is  determined 
by  Its  own  value,  the  exchange  values  of  the  com- 
modities and  the  rapidity  of  their  metamorphoses 
being  given.  Bills  of  a  denomination  of  £5  could 
circulate  in  a  quantity  five  times  less  than  those  of  £  1 
denomination,  and  if  all  payments  were  made  in  shill- 
ing bills,  then  twenty  times  as  many  shilling  bills 
would  have  to  be  in  circulation  as  are  one  pound  bills. 
If  the  gold   currency   were   represented  by  bills   of 

^Benjamin  Franklin,  "Remarks  and  Facts  Relative  to  the 
American  Paper  Money/*  1764,  p.  348,  1.  c  "At  this  very 
time,  even  the  silver  money  in  England  is  obliged  to  the  legal 
tender  for  part  of  its  value;  that  part  which  h  the  difference 
between  its  real  weight  and  its  denomination.  Great  part 
of  the  shillings  and  sixpences  now  current  are  by  wearing  be- 
come 5,  10,  20,  and  some  of  the  sixpences  even  50  per  cent.,  too 
light.  For  this  difference  between  the  real  and  the  nominal  you 
have  no  intrinsic  value.  You  have  not  so  much  as  paper,  you 
have  nothing.  It  is  the  legal  tender,  with  the  knowledge  that 
it  can  easily  be  repassed  for  the  same  value,  that  makes  three- 
pennyworth  of  silver  pass  for  a  sixpence." 

'Berkeley,  1.  c,  p.  5-6.  "Whether  the  denominations  being 
retained,  although  the  bullion  were  gone  .  .  .  might  not 
nevertheless  ...  a  circulation  of  commerce  (be)  main* 
tained?" 


—    156    — 

different  denominations,  e.  g.  five  pound,  one  pound 
and  ten  shilling  bills,  then  the  quantity  of  these  dif- 
ferent tokens  of  value  would  be  determined  not  only 
by  the  quantity  of  gold  necessary  for  circulation  as 
a  whole,  but  also  by  that  required  in  the  sphere  of 
circulation  of  each  kind  of  bills.  If  fourteen  million 
pounds  sterling  (this  is  the  provision  of  the  English 
Bank  Law,  not  for  the  entire  currency  but  only  for 
credit  money)  were  the  level  below  which  the  circu- 
lation of  a  country  never  sank,  then  fourteen  million 
paper  bills,  each  a  token  of  value  of  one  pound,  could 
circulate.  If  the  value  of  gold  fell  or  rose  because 
the  labor-time  necessary  for  its  production  had  fallen 
or  risen,  then,  the  exchange  value  of  the  same  volume 
of  commodities  remaining  the  same,  the  number  of 
one  pound  bills  in  circulation  would  rise  or  fall  in 
inverse  ratio  to  the  change  in  the  value  of  gold.  If 
gold  were  replaced  by  silver  as  a  measure  of  value, 
the  ratio  of  the  respective  values  of  silver  and  gold 
being  1 :15,  and  if  each  bill  were  to  represent  now  ithe 
same  quantity  of  silver  as  it  represented  gold  before, 
then  there  would  be  210  million  one  pound  bills  in  cir- 
culation instead  of  the  previous  fourteen  million. 
The  number  of  paper  bills  is  thus  determined  by  the 
quantity  of  gold  money  which  they  represent  in  cir- 
culation, and  since  they  are  tokens  of  value  only  in 
so  far  as  they  represent  it,  their  value  is  simply  deter- 
mined by  their  quantity.  Thus,  while  the  quantity  of 
gold  in  circulation  is  determined  (by  the  prices  of  com- 
modities, the  value  of  the  paper  bills  in  circulation, 
on  the  contrary,  depends  exclusively  on  their  own 
quantity. 

The  interference  of  the  state  which  issues  paper 


—    157    — 

money  as  legal  tender — and  we  are  treating  of  paper 
money  of  that  kind  only — seems  to  do  away  with  the 
economic  law.  The  state  which  in  its  mint  price  gave 
a  certain  name  to  a  piece  of  gold  of  certain  weight, 
and  in  the  act  of  coinage  only  impressed  its  stamp 
on  gold,  seems  now  to  turn  paper  into  gold  by  the 
magic  of  its  stamp.  Since  paper  bills  are  legal  tender, 
no  one  can  prevent  the  state  from  forcing  as  large  a 
quantity  of  them  as  it  desires  into  circulation  and 
from  impressing  upon  it  any  coin  denomination,  such 
as  il,  £5,  £20.  The  bills  which  have  once  gotten  into 
circulation  can  not  be  removed,  since  on  the  one  hand 
their  course  is  hemmed  in  by  the  frontier  posts  of 
the  country  and  on  the  other  they  lose  all  value,  use- 
value  as  well  as  exchange-value,  outside  of  circula- 
tion. Take  away  from  them  their  function  and  they 
become  worthless  rags  of  paper.  Yet  this  power  of 
the  state  is  a  mere  fiction.  It  may  throw  into  circu- 
lation any  desired  quantity  of  paper  bills  of  whatever 
denomination,  but  with  this  mechanical  act  its  control 
ceases.  Once  in  the  grip  of  circulation  and  the  token 
of  value  or  paper  money  becomes  subject  to  its  in- 
trinsic laws. 

If  fourteen  million  pounds  sterling  were  the  quan- 
tity of  gold  required  for  the  circulation  of  commod- 
ities and  if  the  state  were  to  put  into  circulation  two 
hundred  and  ten  million  bills  each  of  the  denomina- 
tion of  £1,  then  these  two  hundred  and  ten  millions 
would  become  the  representatives  of  gold  to  the 
amount  of  fourteen  million  pounds  sterling.  It  would 
be  the  same  as  if  the  state  were  to  make  the  one 
pound  bills  represent  a  fifteen  times  less  valuable 
metal      or      a      fifteen      times      smaller      weight 


—     158     — 

of  gold.  Nothing  would  be  changed  but  the  nomencla- 
ture of  the  standard  of  price,  which  by  its  very  nature 
is  conventional,  no  matter  whether  such  change  takes 
place  as  a  direct  result  of  a  change  of  the  mint  stand- 
ard or  indirectly  owing  to  an  increase  of  paper  bills  to 
an  extent  required  by  a  new  lower  standard.  Since  the 
name  £  would  stand  now  for  a  fifteen  times  smaller 
quantity  of  gold,  the  prices  of  all  commodities  would 
increase  fifteen  times  and  two  hundred  and  ten  million 
one  pound  bills  would  now  be  actually  as  necessary  as 
fourteen  million  had  been  before.  To  the  same  extent 
to  which  the  combined  quantity  of  tokens  of  value  would 
increase  now,  the  quantity  of  gold  which  each  of  them 
represents  would  decrease.  The  rise  of  prices  would 
constitute  but  a  reaction  on  the  part  of  the  process  of 
circulation  which  forcibly  equates  the  tokens  of  value  to 
the  quantity  of  gold  which  they  are  supposed  to  replace. 
In  the  history  of  the  debasement  of  money  in  England 
and  France  by  their  governments,  we  find  repeatedly  that 
prices  had  not  risen  in  the  same  proportion  in  which  the 
silver  coinage  had  been  debased.  That  was  simply  due 
to  the  fact  that  the  proportion  in  which  the  currency 
was  increased  did  not  correspond  to  the  proportion  in 
which  it  had  been  debased;  that  is  to  say,  because  an 
inadequate  quantity  of  coins  of  the  poorer  metallic  com- 
position was  issued,  if  the  exchange  values  of  commodi- 
ties were  to  be  estimated  in  the  future  in  the  new  coin  as 
a  measure  of  value  and  be  realized  in  coins  correspond- 
ing to  this  smaller  unit  of  measure.  This  solves  the  dif- 
ficulty left  unsettled  in  the  controversy  between  Locke 
and  Lowndes.  The  ratio  which  a  token  of  value,  whether 


—     151)     — 

made  of  paper  or  of  debased  gold  or  silver,  bears  to  cer- 
tain weights  of  gold  or  silver  estimated  according  to  the 
mint  price,  depends  not  on  its  own  composition  but  on 
the  quantity  in  which  it  is  found  in  circulation.  The 
difficulty  in  understanding  this  is  due  to  the  fact  that 
money  in  its  two  functions  of  a  measure  of  value  and  a 
medium  of  circulation  is  subject  to  two  not  only  op- 
posite but  apparently  contradictory  laws  corresponding 
to  the  difference  in  the  two  functions.  In  the  discharge 
of  its  function  of  a  measure  of  value  where  money 
serves  merely  as  money  of  account  and  gold  only  as  ideal 
gold,  everything  depends  on  the  natural  substance  of 
money.  Estimated  in  silver  or  expressed  in  silver  prices 
exchange  values  are  naturally  estimated  quite  differently 
than  when  measured  in  gold  or  as  gold  prices.  On  the 
contrary,  in  its  function  of  a  medium  of  circulation, 
where  gold  is  not  only  imagined  but  is  actually  present 
side  by  side  with  other  commodities,  its  substance  is 
immaterial  and  everything  depends  on  its  quantity.  For 
the  unit  of  measure  the  determining  factor  is  whether 
it  consists  of  a  pound  of  gold,  silver  or  copper ;  while  in 
the  case  of  coin,  no  matter  what  its  own  composition  is, 
it  will  become  the  embodiment  of  each  of  these  units  of 
measure  in  accordance  with  its  quantity.  But  it  goes 
against  common  sense  that  in  the  case  of  mere  imaginary 
money  everything  should  depend  on  its  material  sub- 
stance, while  in  that  of  the  palpably  present  coin  all 
should  be  determined  by  an  ideal  ratio  of  numbers. 

The  rise  or  fall  of  prices  of  commodities  following  a 
rise  or  fall  of  the  quantity  of  paper  notes — ^the  latter 
only   where   paper   currency   constitutes   the   exclusive 


—    160    — 

medium  of  circulation — is  thus  nothing  but  an  asser- 
tion through  the  process  of  circulation  of  a  law  me- 
chanically violated  from  without;  namely,  that  the 
quantity  of  gold  in  circulation  is  determined  by  the 
prices  of  commodities,  and  the  quantity  of  tokens  of 
value  in  circulation  is  determined  by  the  quantity  of 
gold  coin  which  it  represents.  For  that  reason  any 
desired  number  of  paper  notes  will  be  absorbed  and 
equally  digested  by  the  process  of  circulation,  because 
the  token  of  value,  no  matter  with  what  gold  title  it 
may  enter  circulation,  will  be  compressed  within  the 
latter  to  a  token  of  that  quantity  of  gold  which  could 
actually  circulate  in  its  place. 

In  the  case  of  the  circulation  of  tokens  of  value  all 
laws  pertaining  to  the  circulation  of  real  money  ap- 
pear to  be  reversed  and  standing  on  their  heads. 
While  gold  circulates  because  it  has  value,  paper  has 
value  because  it  circulates.  While  with  a  given  ex- 
change value  of  commodities,  the  quantity  of  gold 
in  circulation  depends  on  its  own  value,  the  value  of 
paper  depends  on  its  own  quantity  in  circulation. 
While  the  quantity  of  gold  in  circulation  rises  or  falls 
with  the  rise  or  fall  of  prices  of  commodities,  the 
prices  of  commodities  seem  to  rise  or  fall  with  the 
change  in  the  quantity  of  paper  in  circulation.  While 
the  circulation  of  commodities  can  absorb  only  a 
definite  quantity  of  gold  coin  and  as  a  result  of  that 
the  alternating  contraction  and  expansion  of  the  cur- 
rency appears  as  a  necessary  law,  paper  money  seems 
to  enter  circulation  in  any  desired  amount.  While 
the  sfeite  is  guilty  of  debasing  gold  and  silver  coin  and 
of  disturtwng  their  function  of  a  medium  of  circula- 


—    161    -- 

don,  if  it  turns  out  a  coin,  only  1-100  of  a  grain  be- 
low its  nominal  weight;  it  performs  a  perfectly 
proper  operation  by  issuing  absolutely  worthless 
paper  notes  which  contain  nothing  of  the  metal  ex- 
cept its  mint  denomination.  While  gold  coin  ap- 
parently represents  the  value  of  commodities  only  in 
so  far  as  that  value  is  itself  estimated  in  gold  or  is 
expressed  in  price,  the  token  of  value  seems  to  repre- 
sent directly  the  value  of  commodities.  It  is,  there- 
fore, clear  why  students  who  examined  one-sidedly 
the  phenomena  of  circulation  of  money  by  confining 
their  observations  to  the  circulation  of  legal  tender 
paper  money,  should  have  failed  to  grasp  the  in- 
trinsic laws  governing  the  circulation  of  money.  As 
a  matter  of  fact,  these  laws  appear  not  only  reversed 
but  extinct  in  the  circulation  of  tokens  of  value,  since 
paper  currency,  if  issued  in  the  right  quantity,  goes 
through  certain  movements  which  are  not  in  its 
nature  as  a  token  of  value,  while  its  proper  move- 
ment instead  of  growing  directly  out  of  the  meta- 
morphosis of  commodities,  springs  from  the  violation 
of  its  proper  proportion  to  gold. 


—     162     — 


3.    MONEY. 

Money  as  distinguished  from  coin,  the  result  of  the 
circulation  process  C — M — C,  forms  the  starting  point 
of  the  circulation  process  M — C — M,  i.  e.  the  exchange 
of  money  for  commodity  in  order  to  exchange  com- 
modity for  money.  In  the  form  C — M — C,  commodity 
forms  the  starting  and  final  points  of  the  movement ;  in 
the  form  M — C — M,  money  plays  that  part  In  the 
former  case  money  is  the  medium  of  exchange  of  com- 
modities, in  the  latter  the  commodity  helps  money  to 
become  money.  Money  which  appears  merely  as  a 
means  of  circulation  in  the  first  form  becomes  an  end 
in  the  second  form;  while  commodity  which  appeared 
first  as  the  end,  now  becomes  but  a  means.  Since  money 
is  itself  the  result  of  circulation  C — M — C,  the  result 
of  circulation  appears  at  the  same  time  as  its  starting 
point  in  the  form  M — C — M.  While  in  the  case  of 
C — M — C  the  interchange  of  matter  constituted  the  real 
import  of  the  process,  the  form  of  the  commodity  re- 
sulting from  this  first  process  constitutes  the  import 
of  the  second  process  M — C — M. 

In  the  form  C — M — C  the  two  extreme  members  are 
commodities  of  the  same  value,  but  qualitatively  different 
use-values.     Their  mutual  exchange   C — C  constitutes 


—     163     — 

actual  interchange  of  matter.  In  the  form  M — C — M 
the  two  extremes  are  gold  and  at  the  same  tune  gold  of 
equal  value.  To  exchange  gold  for  a  commodity  in 
order  to  exchange  the  commodity  for  gold,  or  if  we  con- 
sider the  final  result  M — M,  to  exchange  gold  for  gold, 
geems  absurd.  But  if  we  translate  the  formula  M — C — 
M  into  the  expression:  to  buy  in  order  to  sell,  which 
means  nothing  but  to  exchange  gold  for  gold  through 
an  intervening  movement,  we  recognize  at  once  the  pre- 
vailing fonn  of  capitalist  production.  In  actual  prac- 
tice, however,  people  do  not  buy  in  order  to  sell,  but  they 
buy  cheap  in  order  to  sell  dear.  Money  is  exchanged  for 
a  commodity  in  order  to  exchange  the  same  commodity 
for  a  larger  amount  of  money,  so  that  the  extremes  M, 
M  are,  if  not  qualitatively,  then  quantitatively  different. 
Such  a  quantitative  difference  presupposes  the  exchange 
of  non-equivalents,  yet  commodity  and  money  as  such  are 
only  opposite  forms  of  the  same  commodity,  i.  e.  they 
are  different  forms  of  the  same  magnitude  of  value.  The 
circuit  M — C — M  thus  conceals  under  the  forms  of 
money  and  commodity  more  highly  developed  relations 
of  production,  and  is  but  a  reflection  within  the  sphere 
of  simple  circulation  of  a  movement  of  a  more  advanced 
character.  Money,  as  distinguished  from  the  medium  of 
circulation,  must  therefore  be  developed  from  the  direct 
form  of  circulation  of  commodities,  C — M — C. 

Grold,  i.  e.,  the  specific  commodity  which  serves  as  a 
measure  of  value  and  a  medium  of  circulation,  becomes 
money  without  any  further  assistance  on  the  part  of  so- 
ciety. In  England,  where  silver  is  neither  the  measure 
of  value  nor  the  prevailing  medium  of  circulation,  it 


—    164    — 

does  not  become  money,  just  as  gold  in  Holland,  as  soon 
as  it  had  been  dethroned  as  a  measure  of  value,  ceased 
to  be  money.  A  commodity  thus  becomes  money  only  in 
its  combined  capacity  of  a  measure  of  value  and  medium 
of  circulation ;  or,  the  unity  of  the  measure  of  value  and 
medium  of  circulation  is  money.  As  such  a  unity,  how- 
ever, gold  has  a  separate  existence  independent  of  its 
existence  in  the  two  functions.  As  a  measure  of  value 
it  is  only  ideal  money  and  ideal  gold ;  as  a  mere  medium 
of  circulation  it  is  symbolic  money  and  symbolic  gold; 
but  in  its  plain  metallic  bodily  form  gold  is  money  or 
money  is  real  gold. 

Let  us  now  consider  for  a  moment  the  commodity 
gold  when  it  is  in  a  state  of  rest,  and  plays  the  part  of 
money  in  its  relation  to  other  commodities.  All  com- 
modities represent  in  their  prices  a  certain  quantity  of 
gold,  that  is  to  say,  they  are  merely  imaginary  gold  of 
imaginary  money,  representatives  of  gold,  just  as,  on 
the  other  hand,  money  in  the  form  of  a  token  of  value 
appeared  as  a  mere  representative  of  prices  of  commod- 
ities.* Since  all  commodities  are  thus  but  imaginary 
money,  money  is  the  only  real  commodity.  Contrary  to 
commodities,  which  only  represent  the  independently  ex- 
isting exchange  value,  i.  e.,  universal  social  labor,  or  ab- 
stract wealth,  gold  is  the  material  form  of  abstract 
. ^ , % 

*  "Non  solo  i  metalli  ricchi  son  segni  delle  cose  .  .  . ;  m» 
viccndevolmente  le  cose  .  .  .  sono  segni  delForo  e  dell'ar- 
gento."  (A.  Genovesi,  "Lezioni  di  Economia  Civile,"  1765,  p. 
281  in  Custodi,  Parte  Mod.  1.  VIII.)  ("Not  only  are  precious 
metals  tokens  of  things,  but  vice  versa,  things  are  tokens  oi 
gold  and  silver.") 


—     165     — 

wealth.  Through  its  use-value,  every  commodity,  by  its 
relation  to  some  particular  want,  expresses  only  one 
aspect  of  material  wealth,  but  one  side  of  wealth.  Money, 
however,  satisfies  every  want  since  it  can  be  directly 
converted  into  the  object  of  any  want.  Its  own  use- 
value  is  realized  in  the  endless  series  of  use-values  which 
form  its  equivalents.  In  its  virgin  metallic  state  it 
holds  locked  up  all  the  material  wealth  which  lies  un- 
folded in  the  world  of  commodities.  Thus,  while  com- 
modities represent  in  their  prices  the  universal  equiva- 
lent or  abstract  wealth,  viz.,  gold,  the  latter  represents 
in  its  use-value  the  use-values  of  all  commodities.  Gold 
is,  therefore,  the  bodily  representative  of  material 
wealth.  It  is  the  ^^precis  de  toutes  les  choses"  (Bois- 
guillebert),  the  compendium  of  the  wealth  of  society. 
At  one  and  the  same  time,  it  is  the  direct  incarnation 
of  universal  labor  in  its  form,  and  the  aggregate  of  all 
concrete  labor  in  its  substance.  It  is  universal  wealth 
individualized.*  As  a  medium  of  circulation  it  under- 
went aU  kinds  of  injury,  was  clipped,  and  even  reduced 
to  the  condition  of  a  mere  symbolic  paper  rag.  As 
money  it  is  restored  to  its  golden  glory.*     From  a  serve 

*  Petty.  "Gold  and  silver  are  universal  wealth,'*  (Political 
Arithmetic,  1.  c,  p.  242.) 

'E.  Misselden.  'Tree  Trade,  or  the  Means  to  Make  Trade 
Flourish,"  etc.,  London,  1622.  "The  natural  matter  of  Com- 
merce is  Merchandise,  which  Merchants  from  the  end  of  Trade 
have  stiled  Commodities.  The  Artificiall  matter  of  Commerce 
is  Money,  which  hath  obtained  the  title  of  sinewes  of  warre 
and  of  State.  .  .  .  Money,  though  it  be  in  nature  and  time 
after  Merchandise,  yet  forasmuch  as  it  is  now  in  use  become 


—     166     — - 

it  becomes  a  lord.    From  a  mere  understrapper  it  rises 
to  the  position  of  Lord  of  commodities.^ 

a.    HOARDING. 

Gold  separates  itself  as  money  from  the  process  of 
circulation  whenever  a  commodity  interrupts  the  pro- 
cess of  its  metamorphosis  and  remains  in  its  form  of  a 
gold  chrysalis.  This  occurs  every  time  a  sale  is  not  im- 
mediately followed  by  purchase.  The  independent  is- 
olation of  gold  as  money  is,  thus,  a  material  expression 
of  the  disintegration  of  the  process  of  circulation,  or  of 
the  metamorphosis  of  commodities,  into  two  separate 
acts  independent  of  each  other.  The  coin  itself  be- 
comes money  as  soon  as  its  course  is  interrupted.  Tn 
the  hands  of  the  seller  who  takes  it  in  exchange  for 


the  chief e."  (p.  7.)  He  compares  his  own  treatment  of  mer- 
chandise and  money  with  the  manner  of  "Old  Jacob,  who, 
blessing  his  Grandchildren,  crost  his  hands,  and  laide  his  right 
hand  on  the  yonger,  and  his  left  hand  on  the  elder."  (1.  c.) 
Boisguillebert,  "Dissert,  sur  la  Nature  Des  Richesses,"  etc. 
"Viola  done  Tesclave  du  commerce  devenu  son  maltre  .  .  . 
La  mi84^re  des  peuples  ne  vient  que  de  ce  qu'  6n  a  fait  un  maltre, 
ou  plutOt  un  tyran  de  ce  qui  4tait  un  esclave."     ( p.  395,  399, ) 

^  Boisguillebert,  1.  c.  "On  a  fait  une  idole  de  ces  metaux 
(Tor  et  I'argent)  et  laissant  li,  Tobjet  et  I'intention  pour 
lesquels  ils  avaient  6t6  app6l^  dans  le  commerce,  savoir,  pour 
y  servir  de  gages  dans  I'echange  et  la  tradition  reciproque,  on 
les  a  presque  quitt^s  de  ce  service  pour  en  former  des  divinit^s, 
aux  quelles  on  a  sacrifi^  et  sacriSe  toujours  plus  de  biens  et  de 
besoins  pr^ieux  et  m6me  d'hommes,  que  jamais  I'aveugle  an- 
tiquity? n'en  immola  &  ces  fausses  divinit^s,"  etc.     (1.  c,  p.  395.) 


—     167     — 

his  commodity,  it  is  money  and  not  coin;  as  soon  aa 
it  passes  out  of  his  hands  it  is  again  coin.  Ef^eryfoody 
is  a  seller  of  the  one  commodity  which  he  produces,  but 
a  buyer  of  all  other  commodities  which  he  needs  for  his 
existence  in  society.  While  his  selling  is  determined  by 
the  labor-time  required  for  the  production  of  his  com- 
modity, his  buying  is  determined  by  the  continual  re- 
newal of  the  wants  of  life.  In  order  to  be  able  to  buy 
without  having  sold  anything,  he  must  sell  without  buy- 
ing. In  fact,  the  circulation  process  C — M — C  is  a 
d3^namic  unity  of  sale  and  purchase  only  in  so  far  as  it 
constitutes  at  the  same  time  the  constant  process  of  its 
separation.  In  order  that  money  should  flow  continu- 
ously as  coin,  coin  must  constantly  coagulate  as  money. 
The  continuous  flow  of  coin  depends  on  its  constant 
accumulations  in  the  form  of  reserve-funds  of  coin 
which  spring  up  throughout  the  sphere  of  circulation 
and  form  sources  of  supply ;  the  formation,  distribution, 
disappearance,  and  reformation  of  these  reserve  funds 
is  constantly  changing,  their  existence  constantly  dis- 
appears, their  disappearance  constantly  exists.  Adam 
Smith  expressed  this  never-ceasing  transformation  of 
coin  into  money  and  of  money  into  coin  by  saying  that 
every  owner  of  commodities  must  always  keep  in  supply 
besides  the  particular  commodity  which  he  sells,  a  cer- 
tain quantity  of  the  universal  commodity  with  which  he 
buys.  We  saw,  that  in  the  process  C — M — C  the  second 
member  M — C  splits  up  into  a  series  of  purchases  which 
do  not  take  place  at  once,  but  at  intervals  of  time,  so 
that  one  part  of  M  circulates  as  money  while  the  other 
rests  as  money.     Money  is  in  that  case  only  suspended 


—    168    — 

coin  and  the  separate  parts  of  the  circulating  mass  of 
coins  appear  now  in  one  form,  now  in  another,  constant- 
ly changing.  This  first  transformation  of  the  medium 
of  circulation  into  money  represents,  therefore,  but  a 
technical  aspect  of  money  circulation/ 

The  primitive  form  of  wealth  is  that  of  a  surplus  or 
superabundance,  i.  e.,  that  part  of  the  products  which 
are  not  immediately  required  as  use-values,  or  the  pos- 
session of  such  products  whose  use-value  falls  outside 
the  sphere  of  mere  necessaries.  When  considering  the 
transition  of  commodity  into  money  we  saw  that  this 
surplus  or  superabundance  of  products  constitutes  the 
proper  sphere  of  exchange  at  a  low  stage  of  development 
of  production.  Superfluous  products  become  exchange- 
able products  or  commodities.  The  adequate  form  of 
this  surplus  is  gold  and  silver,  the  first  form  in  which 
wealth  as  abstract  social  wealth  is  preserved.  Commod- 
ities can  not  only  be  stored  up  in  the  form  of  gold  and 

silver,  i.  e.,  in  the  substance  of  money,  but  gold  and 

. — . , . . i — I 

^In  the  first  halt  of  the  perpetuum  mobile,  i.  e.,  in  the 
suspension  of  the  function  of  money  as  a  medium  of  circulation, 
Boisguillebert  at  once  suspects  its  independent  existence  from 
commodities.  Money,  he  says,  must  he  "in  constant  motion, 
it  can  he  money  only  by  being  mobile,  but  as  soon  as  it  be- 
comes motionless  all  is  lost."  ("Dans  un  mouvement  con- 
tinuel,  ce  qui  ne  pent  §tre  que  tant  qu'il  est  meuble,  mais 
Bitot  qu'il  devient  immeuble  tout  est  perdu."  ('TLe  Detail  de 
la  France,"  p.  231.)  What  he  overlooks  is  that  this  halt 
constitutes  the  condition  of  its  movement.  What  he  really 
wants  is  that  the  value  form  of  commodities  should  appear 
merely  in  the  transitory  form  of  their  change  of  matter,  but 
should  never  become  an  end  in  itself. 


—     169    — 

silver  are  wealth  in  preBerved  form.  While  every  use- 
value  performs  its  service  as  such  by  being  consumedj 
i.  e.,  destroyed,  the  use-value  of  gold  as  money  con- 
sists in  its  being  the  bearer  of  exchange  value,  in  em- 
bodying universal  labor-time  as  a  shapeless  raw  material. 
As  shapeless  metal,  exchange  value  posseses  an  inde- 
structible form.  Gold  or  silver  thus  brought  to  rest  as 
money,  forms  a  hoard.  Among  nations  with  an  exclu- 
sively metallic  circulation,  such  as  the  ancients  were, 
hoarding  is  practiced  universally  from  the  individual 
to  the  state  which  guards  its  state  hoard.  In  more 
ancient  times,  in  Asia  and  Egypt,  these  hoards  under 
the  protection  of  kings  and  priests  appear  rather  as  a 
mark  of  their  power.  In  Greece  and  Eome  it  was  part 
of  public  policy  to  accumulate  state  hoards  as  the  safest 
and  most  available  form  of  surplus.  The  quick  transfer 
of  such  hoards  by  conquerors  from  one  country  to  an- 
other and  the  sudden  outpour  of  a  part  of  these  hoards 
into  the  general  circulation  constitute  a  peculiar  feature 
of  ancient  economy. 

As  the  incarnation  of  labor-time  gold  is  a  pledge  for 
its  own  value,  and  since  it  is  the  embodiment  of  univer- 
sal labor-time,  the  process  of  circulation  pledges  gold 
its  constant  role  of  exchange  value.  Owing  to  the  mere 
fact  that  the  owner  of  commodities  can  retain  his  com- 
modity in  the  form  of  exchange  value  or  retain  the  ex- 
change-value as  a  commodity,  the  exchange  of  commod- 
ities for  the  purpose  of  retaining  them  in  the  trans- 
formed shape  of  gold  becomes  circulation's  ovm  motive. 
The  metamorphosis  C — M  takes  place  for  the  sake  of 
the  metamorphosis,  i.  e.,  in  order  to  transform  it  from 


—     170     — 

particular  natural  wealth  into  universal  social  wealth. 
Instead  of  change  of  matter,  change  of  form  becomes  its 
own  purpose.  From  a  mere  form  of  the  movement  ex- 
change value  becomes  its  substance.  Commodity  is  pre- 
served as  wealth,  as  commodity,  only  in  so  far  as  it 
keeps  witliin  the  sphere  of  circulation,  and  it  keeps  in 
that  fluent  state  only  in  so  far  as  it  solidifies  in  the  form 
of  silver  and  gold.  It  remains  in  the  stream  of  circu- 
lation as  its  crystal.  At  the  same  time  gold  and  silver 
themselves  become  money  only  in  so  far  as  they  do  not 
play  the  part  of  mediums  of  circulation.  As  non- 
mediums  of  circulation  they  become  money.  The  with- 
drawal of  a  commodity  from  circulation  in  the  form  of 
gold  is  therefore  the  only  means  oi  keeping  it  con- 
stantly within  the  sphere  of  circulation. 

The  owner  of  commodities  can  receive  money  from  cir- 
culation only  in  return  for  a  commodity  which  he  gives 
to  it.  Constant  selling,  continual  throwing  of  com- 
modities into  circulation  is,  therefore,  the  first  condition 
of  hoarding  from  the  standpoint  of  the  circulation  of 
commodities.  On  the  other  hand,  money  as  a  medium 
of  circulation  constantly  disappears  in  the  very  process 
of  circulation  by  being  realized  all  the  time  in  use-values 
and  becoming  dissolved  in  fleeting  pleasures.  It  must, 
therefore,  be  taken  out  of  the  all-consuming  stream  of 
circulation  or  the  commodity  must  be  kept  up  in  its 
first  metamorphosis,  so  that  money  is  prevented  from 
performing  its  function  of  a  means  of  purchase.  The 
commodity  owner  who  has  now  become  a  hoarder,  must 
sell  as  much  as  possible  and  buy  as  little  as  possible,  as 
old  Cato  had  taught:  "patrem  familias  vendacem,  non 


—     171     — 

emacem  esee/'  While  industry  constitutes  the  positive 
condition  of  hoarding,  saving  forms  the  negative  one. 
The  less  the  equivalent  of  a  commodity  is  withdrawn 
from  circulation  in  the  form  of  particular  commodities 
or  use-values,  the  more  it  is  withdrawn  in  the  shape  of 
money  or  exchange  value.'  The  acquisition  of  wealth 
in  its  universal  form  thus  requires  abstinence  from 
wealth  in  its  material  reality.  Thus  the  stimulating 
impulse  for  hoarding  is  greed,  the  objects  of  which  are 
not  commodities  as  use-values,  but  exchange  value  as 
commodity.  In  order  to  get  possession  of  the  surplus 
in  its  universal  form,  the  particular  wants  must  be 
treated  as  so  much  luxury  and  excess.  Thus  the  Cortes 
presented  a  report  to  Philipp  II.,  in  1593,  in  which, 
among  other  things,  was  said:  "The  Cortes  of  Valla- 
dolid  in  the  year  1586  petitioned  Your  Majesty  not  to 
allow  the  further  importation  into  the  Kingdom  of  can- 
illes,  glassware,  jewelry,  knives  and  similar  articles; 
these  things  useless  to  human  life  come  from  abroad 
to  be  exchanged  for  gold,  as  though  the  Spaniards  were 
Indians.**  The  hoarder  despises  the  worldly,  tempo- 
rary and  transitory  enjoyments  ia  his  hunt  after  the 
eternal  treasure,  which  neither  moth  nor  rust  can  eat, 
which  is  perfectly  celestial  and  earthly  at  the  same  time. 
"The  general  remote  cause  of  our  want  of  money  is  the 
great  excess  of  this  Kingdom  in  consuming  the  Com- 
modities of  Forreine  Countries,  which  prove  to  us  discom- 

^"  .  .  .  The  more  the  stock  ...  is  ...  en- 
creased  in  wares.,  the  more  it  decreaseth  in  treasure."  (E. 
Misselden,  1.  c,  p.  23.) 


—    172    — 

modities,  in  hindering  us  of  so  much  treasure,  which 
otherwise  would  bee  brought  in,  in  lieu  of  those  toyes 
.  .  .  Wee  .  .  .  consume  amongst  us,  that  great 
abundance  of  the  Wines  of  Spaine,  of  France,  of  the 
Khene,  of  the  Levant  .  .  .  the  Raisins  of  Spaine, 
the  Corints  of  the  Levant,  the  Lawnes  and  Cambricks  of 
Hannaults  .  .  .  the  Silkes  of  Italic,  the  Sugers  and 
Tobaco  of  the  West  Indies,  the  Spices  of  the  East  Indies : 
All  which  are  of  no  necessetie  unto  us  and  yet  are 
bought  with  ready  mony."* 

In  the  form  of  gold  and  silver,  wealth  is  indestructi- 
ble, both  because  exchange  value  is  preserved  in  the 
shape  of  indestructible  metal,  and,  especially,  because 
gold  and  silver  are  prevented  from  becoming,  as  me- 
diums of  circulation,  mere  vanishing  money  forms  of 
the  commodity.  The  destructible  substance  is  thus  sa,c- 
rificed  for  the  indestructible  form.  "If  money  be  taken 
(by  means  of  taxation)  from  him,  who  spendeth  the 
same  .  .  .  upon  eating  and  drinking,  or  any  other 
perishing  Commodity;  and  the  same  transferred  to  one 
that  bestoweth  it  on  Cloaths;  I  say  that  even  in  this 
case  the  Commonwealth  hath  some  little  advantage ;  be- 
cause Cloaths  do  not  altogether  perish  so  soon  as  Meats 
and  Drinks.  But  if  the  same  be  spent  in  Furniture  of 
Houses,  the  advantage  is  yet  a  little  more ;  if  in  Building 
of  Houses,  yet  more ;  if  in  improving  of  Lands,  working 
of  Mines,  Fishing,  etc.,  yet  more;  but  most  of  all,  in 
bringing  Gold  and  Silver  into  the  Country ;  because  those 
things  are  not  only  not  perishable,  but  are  esteemed  for 

*1.  c,  p.  11-13  passim. 


—     173     — 

Wealth  at  all  times  and  everywhere ;  whereas  other  Com- 
modities which  are  perishable,  or  whose  value  depends 
upon  the  Fashion ;  or  which  are  contingently  scarce  and 
plentiful,  are  Wealth,  but  pro  hie  et  nunc."^  The  with- 
drawal of  money  from  the  stream  of  circulation  and  the 
saving  of  it  from  the  social  interchange  of  matter  reaches 
its  extreme  form  in  the  burying  of  money,  so  that  social 
wealth  is  brought  as  an  underground  indestructible 
treasure  into  a  perfectly  secret  private  relation  with  the 
owner  of  commodities.  Dr.  Bernier,  who  stayed  for 
some  time  at  the  court  of  Aurenzeb  at  Delhi,  tells  U3 
how  the  merchants,  especially  the  Mohammedan  heath- 
ens, who  control  nearly  all  the  trade  and  all  money, 
se<;retly  bury  their  money  deep  in  the  ground,  *^eing 
imbued  with  the  faith  that  the  gold  and  silver  which 
they  put  away  during  their  lives  will  serve  them  after 
death  in  the  next  world."^  However,  in  so  far  as  the  as- 
ceticism of  the  hoarder  is  combined  with  active  in- 
dustry, he  is  rather  a  Protestant  by  religion  and  still 
more  a  Puritan.  "It  can  not  be  denied  that  buying  and 
selling  are  necessary,  that  one  can  not  get  along  without 
them,  and  that  one  can  buy  like  a  Christian  especially 
things  that  serve  in  need  and  in  honor;  for  the  patri- 
archs had  also  bought  and  sold  cattle,  wool,  grain,  but- 
ter, milk  and  other  goods.  They  are  gifts  of  God  which 
He  gives  out  of  the  earth  and  divides  among  men.    But 

^  Petty,  "Political  Arith./'  1.  c,  p.  196  { 1899  edition,  v.  I,  p. 
269.    Transl.) 

'Francois  Bemier,  "Voyage  contenant  la  description  dea 
etats  du  Grand  Mogul."  (Paris  edition,  1830,  t.  1.,  conf.,  p. 
312314. 


—    174    — 

foreign  trade  which  brings  over  from  Calcutta,  India 
and  other  such  places  commodities  consisting  of  costly 
silks,  and  gold  ware,  and  spices  which  only  serve  for 
luxury  and  are  of  no  use,  draining  the  land  and  the 
people  of  their  money,  should  not  be  tolerated  if  we  but 
had  a  government  of  princes.  Yet  I  do  not  wish  to 
write  of  that  now,  for  I  believe  it  will  have  to  stop  of 
itself,  when  we  have  no  money  any  longer;  and  so  will 
luxury  and  gluttony;  for  no  writing  or  teaching  will 
help  until  want  and  poverty  will  force  us."* 

In  times  of  disturbance  in  the  process  of  the  social 
interchange  of  matter,  the  burying  of  money  takes  place 
even  in  bourgeois  societies  which  are  at  a  high  stage  of 
development.     The  social  bond  in  its  compact  form  is 

^  Dr.  Martin  Luther,  "BUcher  vom  Kaufhandel  und  Wucher/' 
1524.  In  the  same  passage  Luther  says:  "Gott  hat  uns 
Deutsche  dahin  geschleidert,  dass  wir  unser  gold  und  silber 
mtissen  in  fremde  Lander  stossen,  alle  Welt  reich  machen  und 
selbst  Bettler  Bleiben.  England  sollte  wohl  weniger  Qoldes 
haben,  wenn  Deutschland  ihm  sein  Tuch  liesse,  und  der  Konig 
von  Portugal  sollte  auch  weniger  haben,  wenn  wir  ihm  die 
WUrze  liessen.  Eechne  Du,  wie  viel  eine  Messe  zu  Frank- 
furt au8  Deutschen  Landen  gef  iirt  wird,  ohne  Not  und  Ursache : 
so  wirst  Du  Dich  wimdern,  wie  es  zugehe,  dass  noch  ein  heller 
in  Deutschen  Landen  sei.  Frankfurt  ist  das  Silber-und  Gold- 
loch,  dadurch  aus  Deutschem  Lande  fleisst,  was  nur  guillet 
und  w&chst,  gemUnzt  oder  geschlagen  wird  bei  uns;  w&re  das 
Loch  zuegeetopft,  so  dUrft  man  itzt  der  Klage  nicht  horen,  die 
allethalben  eitel  Schuld  und  kein  Geld,  alle  Land  und  Stadte 
ausgewuchert  sind.  Aber  lass  gehen,  es  will  doch  also  gehen; 
wir  Deutsche  mtissen  Deutsche  bleiben !  wir  lassen  nicht  ab,  wir 
mttssen  denn." 

In  the  work  quoted  above  Misselden  wishes  to  retain  the  gold 


175 


being  saved  from  the  social  movement  (with  the  owner 
of  commodities  this  bond  is  the  commodity  and  the  ade- 
quate form  of  the  commodity  is  money).  The  social 
nervus  rerum  is  buried  next  to  the  body  whose  nerve  it 
is. 

The  hoard  would  now  become  mere  useless  metal, 
its  money  soul  would  depart  from  it  and  it  would  re- 
main as  the  burnt  ashes  of  circulation,  as  its  caput 
mortuura,  if  it  did  not  constantly  tend  to  get  back  into 
circulation.  Money,  or  crystallized  exchange  value,  is, 
according  to  its  nature,  the  form  of  abstract  wealth; 
but,  on  the  other  hand,  any  given  sum  of  money  is  a 
quantitatively  limited  magnitude  of  value.  The  quan- 
titative limitation  of  exchange  value  is  in  contradiction 
with  its  qualitative  universality  and  the  hoarder  con- 


and  silver  at  least  within  the  confines  of  Christendom:  "The 
other  forreine  remote  causes  of  the  want  of  money,  are  the 
Trades  maintained  out  of  Christendome  to  Turky,  Persia  and 
the  East  Indies,  which  trades  are  maintained  for  the  most  part 
with  ready  money,  yet  in  a  different  manner  from  the  trades 
of  Christendome  within  itselfe.  For  although  the  trades  within 
Christendome  are  driven  with  ready  monies,  yet  those  monies 
are  still  contained  and  continued  within  the  bounds  of  Christen- 
dome. There  is  indeede  a  fluxus  and  refluxus,  a  flood  and  ebbe 
of  the  monies  of  Christendome  traded  within  it  selfe ;  for  some- 
times there  is  more  in  one  part  of  Christendome,  sometimes 
there  is  lesse  in  another,  as  one  Country  wanteth  and  an- 
other aboundeth:  It  cometh  and  goeth,  and  whirleth  about 
the  Circle  of  Christendome,  but  is  still  contained  within  the 
compasse  thereof.  But  the  money  that  is  traded  out  of  Chris- 
tendome into  the  parts  aforesaid  is  continually  issued  out  and 
never  retiimeth  againe."     (p.  19-20.) 


176 


ceives  in  it  a  barrier  which  turns,  in  fact,  into  a  quali- 
tative barrier  as  well  and  makes  of  the  hoard  merely  a 
limited  representative  of  material  wealth.  Money,  in 
its  capacity  of  a  universal  equivalent,  appears,  as  we  have 
seen,  as  a  member  of  an  equation,  the  other  member  of 
which  consists  of  an  endless  series  of  commodities.  It 
depends  on  the  magnitude  of  the  exchange  value  to 
what  extent  money  will  be  realized  in  such  an  endless 
series,  i.  e.,  to  what  degree  it  corresponds  to  the  con- 
ception of  it  as  an  exchange  value.  The  automatic 
movement  of  exchange  value  as  exchange  value  can  only 
tend  to  its  passing  beyond  its  quantitative  limits.  But 
by  exceeding  the  quantitative  limits  of  the  hoard  a  new 
limit  is  created  which  must  be  removed  in  its  turn. 
There  is  no  definite  limit  which  appears  as  a  barrier  to 
further  hoarding,  every  limit  plays  that  part.  Hoard 
accumulation  has,  therefore,  no  inherent  limits,  no  in- 
herent measure;  it  is  an  endless  process  which  finds  in 
each  successive  result  an  impulse  for  a  new  beginning. 
While  the  hoard  is  increased  only  by  being  preserved, 
it  is  preserved  only  by  being  increased. 

Money  is  not  only  an  object  of  the  passion  for  riches ; 
it  is  the  object  of  that  passion.  The  latter  is  essentially 
auri  sacra  fames.  The  passion  for  riches,  contrary  to 
that  for  special  kinds  of  natural  wealth  or  use-values, 
such  as  clothing,  ornaments,  herds,  etc.,  is  possible  only 
when  universal  wealth  has  been  individualized  as  such 
in  a  particular  object  and  can,  therefore,  be  retained  in 
the  form  of  a  single  commodity.  Money  appears  then 
no  less  as  an  object  than  as  a  source  of  the  passion  for 


—    177    — 

riches/  The  underlying  fact  of  the  matter  is  that  ex- 
change value  as  such  and  with  it  its  increase  become 
the  final  aim.  Greed  holds  the  hoard  fast  by  not  allow- 
ing the  money  to  become  a  medium  of  circulation,  but 
the  thirst  for  gold  saves  the  money  soul  of  the  hoard  by 
keeping  up  the  lasting  affinity  of  gold  for  circulation. 

To  sum  up,  the  activity  by  which  hoards  are  built  up 
resolves  itself  into  withdrawal  of  money  from  circula- 
tion by  continually  repeated  sales,  and  simple  hoarding 
or  accumulation.  In  fact,  it  is  only  in  the  sphere  of 
simple  circulation  and,  especially,  in  the  form  of  hoard- 
ing, that  accumulation  of  wealth  as  such  takes  place, 
-while,  as  we  shall  see  later,  in  the  case  of  other  so-called 
forms  of  accumulation  it  is  only  a  misnomer  to  call  them 
by  that  name  in  mere  recollection  of  the  simple  accu- 
mulation of  money.  All  other  commodities  are  hoarded 
either  as  use-values,  in  which  case  the  manner  of  storing 
them  up  is  determined  by  the  peculiarities  of  their  use- 
value  :  the  storing  of  grain,  e.  g.,  requires  special  equip- 
ment ;  the  accumulation  of  sheep  makes  one  a  shepherd ; 
the  accumulation  of  slaves  and  land  creates  relations 
of  master  and  servant,  etc.;  the  accumulation  of  par- 
ticular kinds  of  wealth  requires  special  processes  differ- 
ent from  the  simple  act  of  hoarding,  and  develops  spe-  •^ 
cial  individual  traits.    Or,  wealth  in  the  form  of  com- 

*"A  nmnmo  prima  origo  avaritiae  .  .  .  haec  paulatim 
exarsit  rabie  quadam,  non  jam  avaritia,  sed  fames  auris." 
(Plin.,  Hist.  Nat.,  1.  XXXIII.,  c.  XIV.) 

("From  money  first  springs  avarice  .  .  .  the  latter 
gradually  grows  into  a  kind  of  madness,  which  is  no  more 
avarice,  but  a  thirst  for  gold.'*) 


—    178    — 

modities  is  hoarded  as  exchange-value  and  in  that  ease 
hoarding  appears  as  a  commercial  or  a  specific  economic 
operation.  The  one  who  carries  on  such  operations  be- 
comes a  dealer  in  corn,  in  cattle,  etc.  Gold  and  silver 
are  money  not  through  some  activity  of  the  individual 
who  accumulates  it,  but  as  crystals  of  the  process  of 
circulation  which  goes  on  without  any  aid  on  his  part. 
He  has  nothing  to  do  but  to  put  them  aside,  adding 
new  weights  of  metal  to  his  hoard,  a  perfectly  sense- 
less operation  which,  if  applied  to  all  other  commodities, 
would  deprive  them  of  all  value.^ 

Our  hoarder  appears  as  a  martyr  of  exchange  value, 
a  holy  ascetic  crowning  the  metal  pillar.  He  cares  for 
wealth  only  in  its  social  form  and  therefore  he  buries 

^Horace    thus   understands    nothing   of   the    philosophy    of 
boarding  when  he  says    (Satir.  1.   II.,  Satir.  Ill)  :     "Siquis 
emat  citharas,  emptas  comportat  in  unum,  Nee  studio  citharae 
nee  musae  deditus  ulli ;  Si  scalpra  et  formas  non  sutor ;  nautica 
vela  Aversus  mercaturis;  delirus  et  amens,  Undique  dicatur 
merito.     Qui  discrepat  istis,  Qui  nummos  aurunque  recondit 
nescius  uti  Compositis  metuensque  velut  contingere  sacrum  V* 
"If  one  buys  fiddles,  hoards  them  up  when  bought, 
Though  music's  study  ne'er  engaged  his  thought, 
One  lasts  and  awls,  unrersed  in  cobbler's  craft. 
One  sails  for  ships,  not  knowing  fore  from  aft. 
You'd  call  them  mad :  but  tell  me,  if  you  please. 
How  that  man's  case  is  different  from  these. 
Who  as  he  gets  it,  stows  away  his  gain, 
And  thinks  to  touch  a  farthing  were  profane?" 
(Transl.  by  John  Covington,  London,  1874,  p.  60.) 
Kr.  Senior  understands  the  question  much  better:  '*L*:argeiit 
paratt  etre  la  seule  chose  dont  le  d£sir  est  universel,  et  il  en 


—     179     — 

it  away  from  society.  He  wants  to  have  the  commodity 
in  the  form  in  which  it  is  aJways  capable  of  entering 
circulation  and  therefore  he  withdraws  it  from  circula- 
tion. He  dreams  of  exchange  value  and  therefore  does 
not  exchange.  The  fluid  form  of  wealth  and  its  petri- 
fication, the  elixir  of  life  and  the  stone  of  wisdom  madly 
haunt  each  other  in  alchemic  fashion.  In  his  imagi- 
nary unlimited  passion  for  enjoyment  he  denies  himself 
all  enjoyment  Because  he  wishes  to  satisfy  all  social 
wants,  he  barely  satisfies  his  elementary  natural  wants. 
While  holding  fast  to  his  wealth  in  its  metallic  bodily 
form,  the  latter  escapes  him  as  a  phantom.  As  a  matter  of 
fact,  however,  the  hoarding  of  money  for  the  sake  of 
money  is  the  barbaric  form  of  production  for  produc- 
tion's sake,  i.  e.,  the  development  of  the  productive 
forces  of  social  labor  beyond  the  limits  of  ordinary  wants. 
The  lees  the  production  of  commodities  is  developed, 
the  more  important  is  the  first  crystallization  of  ex- 
change value  into  money,  or  hoarding,  which  plays, 
therefore,  an  important  part  among  the  ancient  nations, 


est  ainsi  parcequc  I'argent  est  une  richesse  abatraiie  et  paroquc 
les  bommes,  en  la  poss^dant  peuvent  satisfaire  2L  toua  leur  be- 
soine  de  quelque  nature  quMls  soient.**  ("Principca  Fondamen- 
taux  de  TEconomie  Politique,  tir^  de  legons  edites  et  inedites  dc 
N.  W.  Senior,  par  Comte  Jean  Arrivabene,"  Paris,  1836,  p.  221. 
( The  corresponding  passage  in  the  English  edition  of  his  Politi- 
cal Economy,  London,  1863,  is  to  be  found  on  p.  27.  Trans- 
lator.) So  does  Storch:  "Since  money  represents  all  other 
forms  of  Tvealth,  it  is  only  necessary  to  accumulate  it  to  pro- 
vide for  oneself  all  kinds  of  wealth  existing  in  the  world."  (1. 
c,  V.  2,  p.  134.) 


—    180    — 

in  Asia  until  the  present  day,  and  among  modern  agri- 
cultural nations  where  exchange  value  has  not  as  yet 
taken  hold  of  all  the  relations  of  production.  Before 
taking  up  the  consideration  of  the  specific  economic 
function  of  hoarding  within  the  sphere  of  metallic  cir- 
culation, let  us  mention  another  form  of  hoarding. 

Quite  apart  from  their  aesthetic  properties,  silver  and 
gold  commodities  are  convertible  into  money,  since  the 
material  of  which  they  are  made  is  a  money  material ; 
and,  inversely,  gold  money  and  gold  bullion  can  be  con- 
verted into  commodities.  Because  gold  and  silver  con- 
stitute the  material  of  abstract  wealth,  the  greatest  dis- 
play of  wealth  consists  of  the  utilization  of  these  metals 
as  concrete  use-values,  and  if  the  owner  of  commodities 
hides  his  treasure  at  certain  stages  of  production,  he  is 
very  anxious  to  appear  before  other  owners  of  commod- 
ities as  rico  homhre  whenever  he  can  do  so  with  safety. 
He  gilds  himself  and  his  house.^  In  Asia,  especially  in 
India,  where,  unlike  under  the  capitalist  system,  the 
hoarding  of  wealth  appears  not  as  a  subordinate  func- 
tion of  the  system  of  production,  but  as  an  end  in  itself, 
gold  and  silver  commodities  are  practically  but  aesthetic 
forms  of  hoards.  In  mediaeval  England  gold  and  silver 
commodities  were  considered  before  the  law  as  mere 
forms  of  treasure,  since  their  value  was  but  slightly  in- 

^To  what  extent  th§  inner  man  of  the  commodity  owner  re- 
mains unchanged,  even  when  he  has  become  civilized  and  has 
developed  into  a  capitalist,  is  shown  by  the  example  of  a  Lon- 
don representative  of  a  cosmopolitan  banking  house  who  adopted 
as  a  fitting  coat  of  arms  for  his  family  a  £100,000  bank  note, 
which  he  had  hung  up  in  a  glass  frame.  The  point  here  is  in 
the  mocking  contempt  of  the  note  for  circulation. 


—     181     — 

creased  by  the  crude  labor  spent  upon  them.  They  were 
destined  to  re-enter  circulation  and  their  fineness  was 
therefore  prescribed  in  the  same  manner  as  that  of 
coin.  The  increasing  use  of  gold  and  silver  as  objects 
of  luxury  with  the  growth  of  wealth  is  such  a  simple 
matter  that  it  was  perfectly  clear  to  the  ancients/  while 
modem  economists  have  advanced  the  erroneous  prop- 
osition that  the  use  of  silver  and  gold  articles  increases 
not  in  proportion  to  the  growth  of  wealth,  but  in  pro- 
portion to  the  fall  in  value  of  the  precious  metals.  Their 
otherwise  accurate  references  to  the  use  of  Californian 
and  Australian  gold  are  inconclusive,  since  the  increased 
consumption  of  gold  as  a  raw  material  does  not  find 
justification,  according  to  their  theory,  in  any  corre- 
sponding decline  in  its  value.  From  1810  to  1830,  in 
consequence  of  the  struggle  of  the  American  colonies 
against  Spain  and  the  interruption  of  mining  caused  by 
revolutions,  the  annual  average  production  of  precious 
metals  declined  by  more  than  one-half.  The  decline 
of  coin  in  circulation  in  Europe  amounted  to  nearly  one- 
sixth,  comparing  the  years  1829  and  1809.  Although 
the  quantity  produced  had  thus  declined  and  the  cost 
of  production,  if  it  had  changed  at  all,  had  increased, 
yet  the  consumption  of  precious  metals  as  objects  of 
luxury  increased  to  an  extraordinary  extent  in  England 
during  the  very  war  and  on  the  continent  after  the 
Peace  of  Paris.  The  consumption  increased  with  the 
general  growth  of  wealth.^  It  may  be  stated  as  a  gen- 
eral law  that  the  conversion  of  gold  and  silver  money 

*  See  the  passage  from  Xenophon,  quoted  below. 
'  Jacob,  1.  c,  v.  2,  ch,  25  and  26. 


laz 


into  articles  of  luxury  prevails  in  times  of  peace,  while 
their  reconversion  into  bullion  or  even  coin  takes  place 
in  stormy  periods.*  How  considerable  the  proportion 
is  of  the  gold  and  silver  treasure  in  the  form  of  articles 
of  luxury  to  the  quantity  of  precious  metals  serving  as 
money  may  be  seen  from  the  fact  that  in  1829  the  pro- 
portion in  England,  according  to  Jacob,  was  two  to  one, 
and  in  entire  Europe  and  America  the  precious  metals 
in  the  form  of  articles  of  luxury  exceeded  those  in  the 
form  of  money  by  one-fourth. 

We  have  seen  that  the  circulation  of  money  is  but 
the  manifestation  of  the  metamorphoses  of  commodities, 
or  of  the  form  under  which  the  social  interchange  of 
matter  takes  place.  With  the  change  in  the  total  price 
of  commodities  in  circulation  or  in  the  volume  of  their 
simultaneous  metamorphoses,  the  rapidity  of  their  change 
of  form  in  each  case  being  given,  the  total  quantity  of 
gold  in  circulation  must  always  expand  or  contract. 
That  is  possible  only  under  the  condition  that  the  total 
quantity  of  money  in  the  country  continually  bear  a  vary- 
ing ratio  to  the  quantity  of  money  in  circulation-  This 
condition  is  met  by  the  process  of  hoarding.  With  a 
fall  in  prices  or  rise  in  the  rapidity  of  circulation,  the 
hoard-reservoirs  absorb  that  part  of  money  which  is 
thrown  out  of  circulation ;  with  a  rise  in  price  or  a  de- 


*  "In  times  of  great  agitation  and  insecurity,  especially  dur- 
ing internal  commotions  or  invasions,  gold  and  silver  articles 
are  rapidly  converted  into  money;  whilst  during  periods  of 
tranquility  and  prosperity,  money  is  converted  into  plate  and 
jewelry."     (1.  c,  v.  2,  p.  367.) 


—     183     — 

cline  in  the  rapidity  of  circulation,  the  hoards  open  np 
and  return  a  part  of  their  contents  to  the  stream  of 
circulation.  The  solidification  of  circulating  money 
into  hoards  and  the  outpouring  of  hoards  into  circula- 
tion is  a  constantly  oscillating  movement  in  which  the 
prevalence  of  the  one  or  the  other  tendency  is  deter- 
mined exclusively  by  fluctuations  in  the  circulation  of 
commodities.  Hoards  thus  serve  as  conduits  for  the 
supply  and  withdrawal  of  money  to  or  from  circulation, 
so  that  every  time  only  that  quantity  of  money  circu- 
lates as  coin  which  is  required  by  the  immediate  needs 
of  circulation.  If  the  volume  of  the  entire  circula- 
tion suddenly  expands  and  the  fluent  unity  of  sale  and 
purchase  assumes  such  dimensions  that  the  total  sum  of 
prices  to  be  realized  increases  more  rapidly  than  the 
rapidity  of  the  circulation  of  money,  the  hoards  decrease 
perceptibly;  but  when  the  combined  movement  slackens 
to  an  unusual  extent,  or  the  movement  of  buying  and 
selling  steadies  itself,  the  medium  of  circulation  solidi- 
fies into  money  in  large  measure,  and  the  treasure  reser- 
voirs fill  up  far  above  their  average  level.  In  countries 
with  an  exclusively  metallic  circulation  or  where  pro- 
duction is  at  a  low  stage  of  development,  the  hoards  are 
endlessly  split  up  and  scattered  all  over  the  land,  while 
in  countries  where  the  capitalist  system  is  developed 
they  are  concentrated  in  bank  reservoirs.  Hoards  are 
not  to  be  confounded  with  coin  reservoirs,  which 
form  a  constituent  part  of  the  total  supply  of 
money  in  circulation,  while  the  interaction  between 
hoards  and  currency  implies  the  decline  or  rise  of  its 
total  supply.    Gold  and  silver  commodities  form,  as  we 


~    184    — 

have  seen,  both  conduits  for  the  withdrawal  of  precious 
metals,  as  well  as  sources  of  their  supply.  In  ordinary 
times  only  their  former  function  is  of  importance  to 
the  economy  of  metallic  circulation/ 

^  In  the  following  passage  Xenophon  develops  money  in  its 
specific  forms  of  money  and  hoard :    "iv  novt^  tovt«  &v  iyi»  olSa  Iff 

fiav  ov5e  ^dofetovSet?  tois  ejritrKevafo/Aei'Ots...apyvprTi?  5e  o<r<j>  av  vXtiittv  f^otvif- 
Tai,  Ktti  afyyvpiov  irkelov  yiyvijrai,  toctovtw  irAeioves  eiri  to  epyov  towto  cpxofTat.... 
Kox  yap  Srf  iirivka  fiev  eirei&ap  txava  tc?  KT^arjrai  rrj  oi#cia,  ov  fA.d\a  In  wpo<ru- 
vovrrai-  apyvpioy  Si  ovSeli  irtm  ovtu>  nokv  eKrijo-aro  uxrrt  ftr)  en  vpoaQvlvOai^  a\k' 
1JV  rial  yevTjTot  TraftTrAijOes,  to  veptrrevov  »caTopvTTOfTe9  ovBeif  ^ttoi'  rfSovrai  ^ 
XP^f^evoi  avT<i-  Kal  fLijv  oray  ye  ei  irparTtoaiv  at  irokeif  t<rxvpws,  ot  ay0ponroi  «p- 
yvpiov  Seovrai'  Oi  fiev  yap  dvSpe^  ajui^i  OTrAa  re  KoXajial  iirirovs  dya0ovi  Koi  Oi- 
Ktas  «cal  KaraaKevdi  fLeyaXovpeireis  ^ovAofrai  fiaTrai'aj',  ol  5«  yvj'atKes  et?  eo-^Ta 
vokvreKi]  Kal  xpvcrovv  Koap-ov  rpeirovrai  ■  orav  Se  av  voarjaaxri  TroAets  ^  cuftopw 
KapnS>v  ^  TToKepiM  in  Koi  ttoAv  ftaXAoi'  ti};  y^?  apyov  yiyvofAeiai?  KOt  ci$  evir^eta 
ical  eif   eiriKovpovc     vop.i<rp,aro^    Seovrai."   (-A-Cn.  Cle   VeCtlgaliDUS,  C.  iV.) 

("Of  all  operations  with  which  I  am  acquainted,  this  is  the 
only  one  in  which  no  sort  of  jealousy  is  felt  at  a  further  devel- 
opment of  the  industry  .  .  .  the  larger  the  quantity  of  ore 
discovered  and  the  greater  the  amount  of  silver  extracted,  the 
greater  the  number  of  persons  ready  to  engage  in  the  opera- 
tion .  .  .  No  one  when  he  has  got  sufficient  furniture  for 
his  house  dreams  of  making  further  purchases  on  this  head, 
but  of  silver  no  one  ever  yet  possessed  so  much  that  he  was 
forced  to  cry  "Enough."  On  the  contrary,  if  ever  anybody 
does  become  possessed  of  an  immoderate  amount  he  finds  as 
much  pleasure  in  digging  a  hole  in  the  ground  and  hoarding  it 
as  an  actual  employment  of  it  .  .  .  When  a  state  is  pros- 
perous there  is  nothing  which  people  so  much  desire  as  silver. 
The  men  want  money  to  expend  on  beautiful  armor  and  fine 
horses,  and  houses  and  sumptuous  paraphernalia  of  all  sorts. 
The  women  betake  themselves  to  expensive  apparel  and  orna- 
ments of  gold.  Or  when  states  are  sick,  either  through  barren- 
ness of  corn  and  other  fruits,  or  through  war,  the  demand  for 
current  coin  is  even  more  imperative  (whilst  the  ground  lies 
unproductive) ,  to  pay  for  necessaries  or  military  aid."  (Transl. 
by  H.  G.  Dakyns,  London,  1892,  v.  2,  Revenues,  p.  335-336.) 
Aristotle  develops  in  Book  I.,  ch.  9  of  his  Politics  the  two 
opposite  movements  of  circulation,  C-M-C  and  M-C-M,  calling 
them  "economics"  and  "chrematistics"  respectively.  The  two 
forms  are  represented  by  the  Greek  tragedian  Euripides  as 
Sikn  (right)  and  Keodos  (profit). 


--.    185    — 

b.  MEANS  OF  PAYMElfT. 

The  two  forms  which  have  so  far  distinguished  money 
from  the  circulating  medium  are  those  of  suspended  coin 
and  of  the  hoard.  The  temporary  transformation  of  coin 
into  money  in  the  case  of  the  former  means  that 
the  second  phase  of  C — ^M — C,  namely  purchase 
M — C,  must  break  up  within  a  certain  sphere  of 
circulation  into  a  series  of  successive  purchases.  As 
to  hoarding,  it  is  simply  based  on  the  isolation  of  the 
act  C — M  when  it  does  not  immediately  pass  into  M — C, 
or  is  but  an  independent  development  of  the  first  meta- 
morphosis of  a  commodity;  it  represents  money  as  the 
result  of  the  alienation  of  all  commodities  in  contra- 
distinction to  the  medium  of  circulation  as  the  embodi- 
ment of  commodities  in  their  always  alienable  form. 
Coin  reserves  and  hoards  are  money  only  as  non-circulat- 
ing mediums  and  are  non-circulating  mediums  only  be- 
cause they  do  not  circulate.  In  the  capacity  in  which 
we  consider  money  now,  it  circulates  or  enters  circula- 
tion, but  does  not  perform  the  function  of  a  circulating 
medium.  As  a  medium  of  circulation  money  is  always 
a  means  of  purchase,  now  it  does  not  act  in  that  capacity. 

As  soon  as  money  develops  through  the  process  of 
hoarding  into  the  embodiment  of  abstract  social  wealth 
and  the  tangible  representative  of  material  wealth,  it 
assumes  in  that  capacity  special  functions  within  the 
process  of  circulation.  If  money  circulates  merely  as  a 
medium  of  circulation  and  therefore  as  a  means  of 
purchase,  it  is  understood  that  commodity  and  money 
confront  each  other  at  the  same  time,  i.  e.,  that  the  same 


—    186    — 

value  is  present  in  a  double  form :  at  one  pole,  as  a 
commodity  in  the  hands  of  the  seller;  at  the  other 
pole  as  money  in  the  hands  of  the  buyer.  This  sim- 
ultaneous existence  of  the  two  equivalents  at  opposite 
poles  and  their  simultaneous  change  of  places  or  mu- 
tual alienation  presupposes  in  its  turn  that  seller  and 
buyer  enter  into  relations  as  owners  of  equivalents 
that  are  on  hand.  But  in  the  course  of  time,  the 
process  of  the  metamorphosis  of  commodities  which 
produces  the  different  forms  of  money,  transforms 
also  the  owners  of  commodities  or  changes  the  char- 
acter in  which  they  appear  before  each  other  in  the 
community.  In  the  process  of  metamorphosis  of  the 
commodity  the  guardian  of  the  latter  changes  his  skin 
as  often  as  the  commodity  changes  place  or  as  the 
money  assumes  new  forms.  Thus,  the  owners  of 
commodities  originally  confronted  each  other  only  as 
commodity  owners,  but  later  on  they  became  one  a 
buyer,  the  other  a  seller ;  then  each  became  alternately 
buyer  and  seller,  then  hoarders,  and  finally  rich  men. 
In  that  manner,  the  owners  of  commodities  do  not 
come  out  of  the  process  of  circulation  the  same  men 
that  they  entered.  In  fact  the  different  forms  which 
money  assumes  in  the  process  of  circulation  are  but 
crystallized  changes  of  form  of  the  commodities 
themselves,  which  in  their  turn  are  but  concrete  ex- 
pressions of  the  changing  social  relations  in  which 
commodity  owners  carry  on  the  interchange  of  matter 
with  one  another.  New  trade  relations  spring  up  in 
the  process  of  circulation,  and,  as  representatives  of 
these  changed  relations,  commodity  owners  assume 
new  economic  roles.    Just  as  gold  becomes  idealized 


—     18?     — 

within  the  process  of  circulation  and  plain  paper,  in 
its  capacity  of  a  representative  of  gold,  performs  the 
function  of  money,  so  does  the  same  process  of  cir- 
culation lend  the  weight  of  actual  seller  and  buyer 
to  the  buyer  and  seller  who  enter  it  merely  as  repre- 
sentatives of  future  money  and  future  commodities. 
All  the  forms  in  which  gold  develops  into  money, 
are  but  the  unfolding  of  potentialities  which  the 
metamorphosis  of  commodities  bears  within  itself. 
These  forms  did  not  become  distinctly  differentiated 
in  the  process  of  simple  money  circulation  where 
money  appears  as  coin  and  the  movement  C — M — C 
forms  a  dynamic  unity;  at  most,  they  appeared  as 
mere  potentialities  as,  e.  g.,  in  the  case  of  the  break 
in  the  metamorphosis  of  a  commodity.  We  have 
seen  that  in  the  process  C — M  the  relations  between 
the  commodity  and  money  were  those  of  an  actual 
use-value  and  ideal  exchange-value  to  an  actual  ex- 
change value  and  only  ideal  use-value.  By  alienating 
his  commodity  as  a  use-value  the  seller  realized  its 
own  exchange  value  and  the  use-value  of  money.  On 
the  contrary,  the  buyer,  by  alienating  his  money  as 
exchange  value,  realized  its  own  use-value  and  the 
price  of  the  commodity.  Commodity  and  money 
changed  places  accordingly.  When  it  comes  to  a  real- 
ization in  actual  life  of  this  bi-polar  contrast,  a  new 
break  occurs.  The  seller  actually  alienates  his  com- 
modity, but  realizes  its  price  only  in  idea :  he  has  sold 
his  commodity  at  its  price,  which  is  to  be  realized, 
however,  only  subsequently,  at  a  time  agreed  upon. 
The  purchaser  buys  as  the  representative  of  future 
money,  while  the  vender  sells  as  the  owner  of  present 


—    188    — 

goods.  On  the  part  of  the  vender,  the  commodity 
as  use-value  is  actually  alienated,  without  the  price 
being  actually  realized ;  on  the  part  of  the  purchaser, 
money  is  actually  realized  in  the  use-value  of  the 
commodity,  without  being  actually  alienated  as  ex- 
change value.  Instead  of  a  token  of  value  repre- 
senting money  symbolically  as  was  the  case  before, 
the  purchaser  himself  performs  that  part  now.  And 
just  as  in  the  former  case  the  symbolic  nature  of  the 
token  of  value  called  forth  the  guarantee  of  the  state 
which  has  made  it  legal  tender,  so  does  the  personal 
symbolism  of  the  buyer  bring  about  legally  enforcible 
private  contracts  among  commodity  owners. 

The  contrary  may  happen  in  the  process  M — C, 
where  the  money  can  be  alienated  as  a  real  means  of 
purchase,  and  in  that  way  the  price  of  the  commodity 
can  be  realized  before  the  use-value  of  the  money  is 
realized  and  the  commodity  actually  delivered.  This 
occurs  constantly  under  the  everyday  form  of  pre- 
payments. And  it  is  under  this  form  that  the  English 
government  purchases  opium  from  the  ryots  of  India, 
or,  foreign  merchants  residing  in  Russia  mostly  buy 
agricultural  products.  In  these  cases,  however,  the 
money  always  acts  in  its  well  known  role  of  a  means 
of  purchase  and  therefore,  does  not  assume  any  new 
forms.*  We  need  not  dwell,  therefore,  on  this  case 
any  longer;  but  with  reference  to  the  changed  form 
which  the  two  processes  M — C  and  C — M  assume 

'Of  course,  capital  also  is  advanced  in  the  shape  of  money, 
and  the  money  thus  advanced  may  be  advanced  capital,  but 
this  point  of  view  does  not  fall  within  the  horizon  of  simple 
circulation. 


—    189    — 

now,  we  may  note  that  the  difference  between  pur- 
chase and  sale  which  appeared  but  imaginary  in  the 
direct  process  of  circulation,  now  becomes  a  real  dif- 
ference, since  in  the  former  case  only  the  money  is 
present  and  in  the  latter  only  the  commodity,  and  in 
either  case  only  that  extreme  is  present  from  which 
the  initiative  comes.  Besides,  the  two  forms  have 
this  in  common:  that  in  either,  one  of  the  equivalents 
is  present  only  in  the  common  will  of  the  buyer  and 
seller, — a  will  that  is  binding  on  both  and  assumes 
definite  legal  forms. 

Seller  and  buyer  become  creditor  and  debtor. 
While  the  commodity  owner  looked  comical  as  the 
guardian  of  a  treasure,  he  now  becomes  awe-inspir- 
ing, since  he  no  longer  identifies  himself  but  his  neigh- 
bor with  a  certain  sum  of  money  and  makes  him  and 
not  himself  a  martyr  of  exchange  value.  From  a  be- 
liever he  becomes  a  creditor,  for  religion  he  substi- 
tutes law. 

"I  stay  here  on  my  bond !" 

Thus,  in  the  modified  form  C — M  in  which  the 
commodity  is  present  and  money  is  only  represented, 
money  plays  first  of  all  the  part  of  a  measure  of 
value.  The  exchange  value  of  the  commodity  is  esti- 
mated in  money  as  its  measure;  but  as  exchange 
value,  established  by  contract,  price  exists  not  only 
in  the  mind  of  the  seller,  but  also  as  a  measure  of 
obligation  on  the  part  of  the  buyer.  Besides  serving 
as  a  measure  of  value,  money  plays  here  the  part  of 
a  means  of  purchase,  although  in  that  capacity  it  only 
casts  ahead  the  shadow  of  its  future  existence.  It 
attracts  the  commodity  from  its  position  in  the  hand 


—    190    ~ 

of  the  seller  into  that  of  the  buyer.  As  soon  as  the 
term  of  the  contract  expires,  money  enters  circula- 
tion, since  it  changes  its  position  by  passing"  from  the 
hands  of  the  former  buyer  into  those  of  the  former 
seller.  But  it  does  not  enter  circulation  as  a  circu- 
lating medium  or  as  a  means  of  purchase.  It  per- 
formed those  functions  before  it  was  present  and 
it  appears  after  it  has  ceased  to  perform  them.  It 
now  enters  circulation  as  the  only  adequate  equivalent 
of  the  commodity,  as  the  absolute  form  of  existence 
of  exchange  value,  as  the  last  word  of  the  process  of 
exchange,  in  short  as  money,  and  money  in  its  distinct 
role  of  a  universal  means  of  payment.  In  this  ca- 
pacity of  a  means  of  payment  money  appears  as  the 
absolute  commodity,  but  within  the  sphere  of  circu- 
lation and  not  without  it  as  was  the  case  with  hoards. 
The  difference  between  the  means  of  purchase  and  the 
means  of  payment  makes  itself  unpleasantly  felt  in 
periods  of  commercial  crises.* 

Originally,  the  conversion  of  the  product  into 
money  in  the  sphere  of  circulation  appears  only  as 
an  individual  necessity  for  the  commodity  owner  in 
so  far  as  his  own  product  has  no  use-value  to  him, 
but  has  to  acquire  it  first  by  being  alienated.  But  in 
order  to  pay  at  the  expiration  of  the  contract,  he 
must  have  sold  commodities  before  that.  Thus,  en- 
tirely apart  from  his  individual  wants,  the  movement 
of  the  circulation  process  makes  selling  a  social  neces- 
sity with  every  owner  of  commodities.     As  a  former 

"The  difference  between  the  means  of  purchase  and  the 
means  of  payment  is  emphasized  by  (Luther. 


—    191    — 

buyer  of  a  commodity  he  is  compelled  to  become  a 
seller  of  another  commodity  in  order  to  get  money 
not  as  a  means  of  purchase  but  as  a  means  of  pay- 
ment, as  the  absolute  form  of  exchange  value.  The 
conversion  of  commodity  into  money  as  a  final  act, 
or  the  first  metamorphosis  of  a  commodity  as  an  end 
in  itself  which  in  the  case  of  hoarding  seemed  to  be 
a  matter  of  caprice  on  the  part  of  the  commodity 
owner,  becomes  now  an  economic  function.  The  mo- 
tive and  essence  of  sale  for  the  sake  of  payment  be- 
comes from  a  mere  form  of  the  process  of  circulation 
its  self  emanating  substance. 

In  this  form  of  sale  the  commodity  completes  its 
change  of  position ;  it  circulates  while  it  postpones  its 
first  metamorphosis,  viz.  its  transformation  into 
money.  On  the  contrary,  on  the  part  of  the  buyer 
the  second  metamorphosis  is  completed,  i.  e.  money 
is  reconverted  into  a  commodity  before  the  first  meta- 
morphosis has  taken  place,  i.  e.,  before  the  com- 
modity has  been  turned  into  money.  The  first  meta- 
morphosis thus  takes  place  after  the  second  in  point 
of  time ;  and  thereby,  money  i.  e.  the  form  of  the  com- 
modity in  its  first  metamorphosis,  acquires  a  new 
destination.  Money  or  the  spontaneous  development  of 
exchange-Value,  is  no  longer  a  mere  intermediary  form 
of  the  circulation  of  commodities,  but  its  final  result. 

That  such  time  sales  in  which  the  two  poles  of  the 
sale  are  separated  in  point  of  time,  have  their  natural 
origin  in  the  simple  circulation  of  commodities,  re- 
quires no  elaborate  proof.  In  the  first  place,  the  de- 
velopment of  circulation  leads  to  a  continual  repeti- 


—    192    — 

tion  of  the  mutual  transactions  between  the  same 
commodity  owners  who  confront  each  other  as  seller 
and  buyer.  The  repetition  is  not  accidental;  on  the 
contrary,  goods  are  ordered,  let  us  say,  for  a  certain 
date  in  the  future  when  they  are  to  be  delivered  and 
paid  for.  In  that  case  the  sale  is  ideal,  i.  e.  it  is 
l^ally  accomplished  without  the  actual  presence  of 
the  goods  and  money.  Both  forms  of  money,  those 
of  a  medium  of  circulation  and  of  a  means  of  pay- 
ment still  coincide  here,  since  in  the  first  place,  com- 
modity and  money  change  places  simultaneously,  and 
secondly,  the  money  does  not  buy  the  commodity,  but 
realizes  the  price  of  the  commodity  purchased  be- 
fore. In  the  second  place,  the  nature  of  a  great  many 
use-values  makes  the  simultaneous  alienation  and  de- 
livery of  the  goods  impossible,  and  delivery  has  to 
be  postponed  for  a  certain  time;  e.  g.,  when  the  use 
of  a  house  is  sold  for  one  month,  the  use-value  of 
the  house  is  delivered  only  at  the  expiration  of  the 
month,  although  it  changes  hands  at  the  beginning  of 
the  month.  Since  the  actual  transfer  of  the  use- 
value  and  its  virtual  alienation  are  separated  here  in 
point  of  time,  the  realization  of  its  price  occurs  also 
atfer  its  change  of  place.  Finally,  the  difference  in 
the  seasons  and  in  the  length  of  time  required  for  the 
production  of  various  commodities  brings  about  a 
situation  where  one  tries  to  sell  his  goods,  while  the 
other  is  not  ready  to  buy ;  and  with  the  repeated  pur- 
chases and  sales  between  the  same  commodity  owners 
the  two  ends  of  sale  fall  apart  according  to  the  con- 
ditions of  production  of  the  respective  commodities. 
Thus  arises  a  relation  of  creditor  and  debtor  between 


—     193    — 

the  owners  of  commodities  which,  though  constituting 
the  natural  foundation  of  the  credit  system,  may  be 
fully  developed  before  the  latter  comes  into  existence. 
It  is  clear  that  with  the  extension  of  the  credit  system, 
and,  consequently,  with  the  development  of  the 
capitalist  system  of  production  in  general,  the  func- 
tion of  money  as  a  means  of  payment  will  extend  at 
the  expense  of  its  function  as  a  means  of  purchase 
and,  still  more,  as  an  element  of  hoarding.  In  Eng- 
land, e.  g.,  money  as  coin  has  been  almost  completely 
banished  into  the  sphere  of  retail  and  petty  trade  be- 
tween producers  and  consumers,  while  it  dominates 
the  sphere  of  large  commercial  transactions  as  a 
means  of  payment.* 

As  the  universal  means  of  payment  money  becomes 
the  universal  commodity  of  all  contracts,  at  first  only  in 

*Mr.  MacLeod,  in  spite  of  his  doctrinaire  conceit  about  defi- 
nitions, fails  so  utterly  to  grasp  the  most  elementary  econom- 
ic relations  that  he  tries  to  deduce  the  very  origin  of  money 
from  its  crowning  form,  viz.,  that  of  a  means  of  payment.  He 
says  among  other  things  that  since  people  do  not  always  need 
each  other's  services  at  the  same  time,  and  not  to  the  same 
extent,  "there  would  remain  over  a  certain  difference  or 
amount  of  service  due  from  the  first  to  the  second — debt." 
The  owner  of  this  debt  needs  the  services  of  a  third  person, 
who  does  not  directly  need  those  of  the  second,  and  "transfers 
to  the  third  the  debt  dut  to  him  from  the  first.  Evidence  of 
debts  changes  so  hands — currency.     .     .  When  a  person 

received  an  obligation  expressed  by  metallic  currency,  he  is 
able  to  command  the  services  not  only  of  the  original  debtor, 
but  of  the  whole  of  the  industrious  community."  (MacLeod, 
"Theory  and  Practice  of  Banking,"  etc.,  London,  1855,  v.  L, 
ch.  L) 


194 


the  sphere  of  circulation  of  commodities.'  But  with  the 
development  of  this  function  of  money,  all  other  forms 
of  payment  are  gradually  converted  into  money  pay- 
ments. The  extent  to  which  money  is  developed  as  the 
exclusive  means  of  payment  indicates  the  degree  to; 
which  exchange  value  has  taken  hold  of  production  in 
its  depth  and  breadth.* 

The  volume  of  money  in  circulation,  as  a  means  of 
payment,  is  determined  in  the  first  place,  by  the  amount 
of  payments,  i.  e.  by  the  sum  total  of  the  prices  of  the 
commodities  alienated,  but  not  about  to  be  alienated,  as 

^Bailey,  1.  c,  p.  3.  "Money  is  the  general  commodity  of 
contracts,  or  that  in  which  the  majority  of  bargains  about 
property,  to  be  completed  at  a  future  time,  are  made." 

'Says  Senior  (in  his  Lectures,  published  by  Comte  Arriva- 
bene,  1.  c,  p.  117)  :  "Since  the  value  of  everything  changes 
within  a  certain  period  of  time,  people  select  as  a  means  of  pay- 
ment an  article  whose  value  changes  least  and  which  retains 
longest  a  given  average  ability  to  buy  things.  Thus,  money  be- 
comes the  expression  or  representative  of  values."  On  the  con- 
trary: just  because  gold,  silver,  etc.,  have  become  money,  i.  e., 
the  embodiment  of  independently  existing  exchange  value,  they 
become  the  imiversal  means  of  payment.  When  the  considera- 
tion as  to  the  stability  of  the  value  of  money  mentioned  by  Mr. 
Senior  comes  into  play,  i.  e.,  in  periods  when  money  asserts  it- 
self as  the  universal  means  of  payment  through  the  force  of 
circumstances,  then  is  just  the  time  when  fluctuations  in  the 
value  of  money  are  discovered.  Such  was  the  time  of  Elizabeth 
in  England,  when  Lord  Burleigh  and  Sir  Thomas  Smith,  in 
view  of  the  manifest  depreciation  of  the  precious  metals,  pul 
through  an  act  of  parliament  which  obliged  the  universities  of 
Oxford  and  Cambridge  to  stipulate  the  payment  of  one-third  ^ 
their  ground  rents  in  wheat  and  malt. 


^    195    — 

in  the  case  of  the  simple  circulation  of  money.  The 
quantity  thus  determined  is  subject,  however,  to  two 
modifications.  The  first  modification  is  due  to  the 
rapidity  with  which  the  same  piece  of  money  repeats 
the  same  function,  i.  e.  with  which  the  several  pay- 
ments succeed  one  another.  A  pays  B,  whereupon  B 
pays  C,  and  so  forth.  The  rapidity  with  which  the 
same  coin  repeats  its  function  as  a  means  of  payment, 
depends  first,  upon  the  continuity  of  the  relation  of 
creditor  and  debtor  among  the  owners  of  commodi- 
ties, the  same  commodity  owner  being  the  creditor 
of  one  person  and  the  debtor  of  another,  etc.,  and 
secondly,  upon  the  interval  which  separates  the  times 
of  various  payments.  This  chain  of  payments  or  of 
supplementary  first  metamorphoses  of  commodities  is 
qualitatively  different  from  the  chain  of  metamor- 
phoses which  is  formed  by  the  circulation  of  money 
as  a  circulating  medium.  The  latter  not  only  makes 
its  appearance  gradually,  but  is  even  formed  in  that 
manner.  A  commodity  is  first  converted  into  money, 
then  again  into  a  commodity,  thereby  enabling 
another  commodity  to  become  money,  etc.;  or,  seller 
becomes  buyer,  whereby  another  commodity  owner 
turns  seller.  This  successive  connection  is  accident- 
ally formed  in  the  very  process  of  the  exchange  of 
commodities.  But  when  the  money  which  A  has  paid 
to  B  is  passed  on  from  B  to  C,  from  C  to  D,  etc., 
and  that,  too,  at  intervals  rapidly  succeeding  one 
another,  then  this  external  connection  reveals  but  an 
already  existing  social  connection.  The  same  money 
passes  through  different  hands  not  because  it  appears 
as  a  means  of  payment ;  it  passes  as  a  means  of  pay- 


—    196     -- 

ment  because  the  different  hands  have  already 
clasped  each  other.  The  rapidity  with  which  money 
circulates  as  a  means  of  payment  thus  shows  that  in- 
dividuals have  been  drawn  into  the  process  of  circu- 
lation much  deeper  than  would  be  indicated  by  the 
same  rapidity  of  the  circulation  of  money  as  coin  or 
as  a  means  of  purchase. 

The  sum  total  of  prices  made  up  by  all  the  pur- 
chases and  sales  taking  place  at  the  same  time,  and, 
therefore,  side  by  side,  constitutes  the  limit  for  the 
substitution  of  the  volume  of  coin  by  the  rapidity  of 
its  circulation.  If  the  payments  that  are  to  be  made 
simultaneously  are  concentrated  at  one  place — which 
naturally  arises  at  first  at  points  where  the  circulation 
of  commodities  is  largest — ^the  payments  balance  each 
other  as  negative  and  positive  quantities:  A  is  under 
obligations  to  pay  B,  while  he  has  to  be  paid  by  C, 
etc.  The  quantity  of  money  required  as  a  means  of 
payment  will,  therefore,  be  determined  not  by  the 
total  amount  of  payments  which  have  to  be  made  sim- 
ultaneously, but  by  the  greater  or  less  concentration 
of  the  same  and  by  the  magnitude  of  the  balance  re- 
maining after  their  mutual  neutralization  as  negative 
and  positive  quantities.  Special  arrangements  are 
made  for  settlements  of  this  kind  even  where  the 
credit  system  is  not  developed  at  all,  as  was  the  case 
e.  g.  in  ancient  Rome.  The  consideration  of  these 
arrangements,  however,  as  well  as  that  of  the  general 
time  limits  of  payment,  which  are  everywhere  estab- 
lished among  certain  elements  in  the  community,  does 
not  belong  here.  We  may  add  that  the  specific  in- 
fluence  which   these   time   settlements   exert  on   the 


—     197     — 

periodic  fluctuations  in  the  quantity  of  money  in  cir- 
culation, has  been  scientifically  investigated  but  lately. 
In  so  far  as  the  payments  mutually  balance  as  posi- 
tive and  negative  quantities,  no  money  actually  ap- 
pears on  the  scene.  It  figures  here  only  in  its  ca- 
pacity of  a  measure  of  value:  first,  in  the  prices  of 
commodities,  and  second,  in  the  magnitude  of  mutual 
obligations.  Aside  from  its  ideal  form,  exchange 
value  does  not  exist  here  independently,  not  even  in 
the  form  of  a  token  of  value;  that  is  to  say,  money 
plays  here  only  the  part  of  ideal  money  of  account. 
The  function  of  money  as  a  means  of  payment  thus 
implies  a  contradiction.  On  the  one  hand,  in  so  far 
as  payments  balance,  it  serves  only  ideally  as  a  meas- 
ure of  value.  On  the  other  hand,  in  so  far  as  a  pay- 
ment has  actually  to  be  made,  money  enters  circula- 
tion not  as  a  transient  circulating  medium,  but  as  the 
final  resting  form  of  the  universal  equivalent,  as  the 
absolute  commodity,  in  a  word,  as  money.  There- 
fore, whenever  such  a  thing  as  a  chain  of  payments 
and  an  artificial  system  of  settling  them,  is  developed, 
money  suddenly  changes  its  visionary  nebulous  shape 
as  a  measure  of  value,  turning  into  hard  cash  or 
means  of  payment,  as  soon  as  some  shock  causes  a 
violent  interruption  of  the  flow  of  payments  and  dis- 
turbs the  mechanism  of  their  settlement.  Thus,  under 
conditions  of  fully  developed  capitalist  production, 
where  the  commodity  owner  has  long  become  a  capit- 
alist, knows  his  Adam  Smith,  and  condescendingly 
laughs  at  the  superstition  that  gold  and  silver  alone 
constitute  money  or  that  money  differs  at  all  from 
other  commodities  as  the  absolute  commodity,  money 


—    198    — 

suddenly  reappears  not  as  a  medium  of  circulation, 
but  as  the  only  adequate  form  of  exchange  value,  as 
the  only  form  of  wealth,  exactly  as  it  is  looked  upon 
by  the  hoarder.  In  its  capacity  of  such  an  exclusive 
form  of  wealth,  it  reveals  itself,  unlike  under  the 
monetary  system,  not  in  mere  imaginary,  but  in  actual 
depreciation  and  worthlessness  of  all  material  wealth. 
That  is  what  constitutes  the  particular  phase  of  crises 
of  the  world  market  which  is  known  as  a  money  crisis. 
The  summum  bonum  for  which  everybody  is  crying 
at  such  times  as  for  the  only  form  of  wealth,  is  cash, 
hard  cash ;  and  by  the  side  of  it  all  other  commodities 
just  because  they  are  use-values,  appear  useless  like 
so  many  trifles  and  toys,  or,  as  our  Dr.  Martin  Luther 
says,  as  mere  objects  of  ornament  and  gluttony.  This 
sudden  reversion  from  a  system  of  credit  to  a  system 
of  hard  cash  heaps  theoretical  fright  on  top  of  the 
practical  panic;  and  the  dealers  by  whose  agency  cir- 
culation is  affected  shudder  before  the  impenetrable 
mystery  in  which  their  own  economical  relations  are 
involved.^ 

Payments,  in  their  turn,  require  the  formation  of 

^Boisguillebert,  who  would  stem  the  development  of  bour- 
geois relations  of  production  and  violently  attacks  the  bour- 
geois personally,  has  a  soft  heart  for  those  forms  ol  money  in 
which  it  appears  only  ideally  or  transiently.  Thus  he  speaks 
first  of  the  medium  of  circulation  and  next  of  the  means  of 
payment.  What  he  does  not  see  is  the  direct  transition  of 
money  from  its  ideal  to  the  material  form,  since  the  hard 
cash  is  latently  present  in  the  ideal  measure  of  value.  That 
money  is  but  another  form  of  commodities,  he  says,  is  shown 
by  wholesale  trade,  in  which  exchange  takes  place  without 
tbe  intervention  of  money,  after  "les  marchandiseB  sont  a^- 
preciee/'    ("Le  Detail  de  la  France,"  I,  «,  p,  S'lO.) 


—     199     — 

reserve  funds,  the  accumulation  of  money  as  a  means 
of  payment  The  building  up  of  reserve  funds  ap- 
pears no  longer  as  a  practice  carried  on  outside  of 
the  sphere  of  circulation,  as  in  the  case  of  hoarding; 
nor  as  a  mere  technical  accumulation  of  coin,  as  in 
the  case  of  coin  reserves ;  on  the  contrary,  money 
must  now  be  gradually  accumulated  to  be  available 
on  certain  future  dates  when  payments  become  due. 
While  hoarding,  in  its  abstract  form  as  a  means  of 
enrichment,  declines  with  the  development  of  the 
capitalist  system  of  production,  that  species  of  hoard- 
ing which  is  directly  called  for  by  the  process  of  pro- 
duction, increases ;  or,  to  put  it  differently,  a  part  of 
the  treasure  which  is  generally  formed  in  the  sphere 
of  circulation  of  commodities,  is  absorbed  as  a  re- 
serve fund  of  means  of  payment.  The  more  de- 
veloped the  capitalist  system  of  production,  the  more 
these  reserve  funds  are  limited  to  the  necessary  mini- 
mum, Locke,  in  his  work  "On  the  Lowering  of  In- 
terest'" furnishes  interesting  data  with  reference  to 
the  size  of  these  reserve  funds  in  his  time.  They 
show  what  a  considerable  part  of  the  total  money  in 
circulation  the  reservoirs  for  means  of  payment  ab- 
sorbed in  England  just  at  the  time  when  banking  be- 
gan to  develop. 

The  law  as  to  quantity  of  money  in  circulation,  as 
it  has  been  formulated  in  the  analysis  of  the  simple 
circulation  of  money,  receives  an  essential  modifica- 
tion when  the  circulation  of  the  means  of  payment  is 
taken  into  account.  The  rapidity  of  the  circulation  of 
money  whether  as  circulating:  medium  or  as  means  of 

^Locke,  1.  c,  p.  17.  18.  " 


—     200     — 

payment — ^being  given,  the  total  amount  of  money  in 
circulation  at  a  given  time  will  be  determined  by  the 
sum  total  of  the  prices  of  commodities  to  be  realized, 
phis  the  total  amount  of  payments  falling  due  at  the 
same  time,  minus  the  amount  of  payments  balancing 
each  other.  The  general  law  that  the  volume  of 
money  in  circulation  depends  on  the  prices  of  com- 
modities is  not  affected  by  this  in  the  least,  since  the 
extent  of  the  payments  is  itself  determined  by  the 
prices  stipulated  in  contracts.  What  is,  however, 
strikingly  demonstrated,  is  that  even  if  the  rapidity  of 
circulation  and  the  economy  of  payments  be  assumed 
to  remain  the  same,  the  sum  total  of  the  prices  of 
the  commodities  circulating  in  a  given  period  of  time, 
say  one  day,  and  the  volume  of  money  in  circulation 
on  the  same  day  are  by  no  means  equal,  because  there 
is  a  large  number  of  commodities  in  circulation  whose 
prices  have  yet  to  be  realized  in  money  at  a  future 
date,  and  there  is  a  quantity  of  money  in  circulation 
which  constitutes  the  payment  for  commodities  which 
have  long  gone  out  of  circulation.  The  latter  amount 
will  depend  on  the  sum  of  payments  falling  due  on 
the  same  day  although  contracted  for  at  entirely  dif- 
ferent periods. 

We  have  seen  that  a  change  in  the  values  of  gold 
and  silver  does  not  affect  their  function  as  measures 
of  value  or  money  of  account  But  this  change  is  of 
decisive  importance  for  money  as  a  hoard,  since  with 
the  rise  or  fall  of  value  of  gold  and  silver,  the  total 
value  of  a  gold  or  silver  hoard  will  also  rise  or  fall. 
Of  still  greater  importance  is  the  effect  of  this  change 
on  money  as  a  means  of  payment.    The  payment  takes 


—    201    — 

place  after  the  sale  of  the  commodity,  or  the  money 
serves  in  two  different  capacities  at  two  different  pe- 
riods; first,  as  a  measure  of  value,  then  as  a  means 
of  payment  corresponding  to  the  measurement.  If, 
during  this  interval,  the  value  of  the  precious  metals 
or  the  labor-time  necessary  for  their  production  un- 
dergoes a  change,  the  same  quantity  of  gold  or  silver 
will  be  worth  more  or  less  when  it  appears  as  a  means 
of  payment  than  what  it  was  when  it  served  as  a 
measure  of  value,  i.  e.,  when  the  contract  was  con- 
cluded. The  function  of  a  particular  commodity, 
like  gold  or  silver,  to  serve  as  money  or  independent 
exchange  value  comes  here  in  conflict  with  the  nature 
of  the  particular  commodity  whose  magnitude  of 
value  depends  on  changes  in  the  cost  of  its  produc- 
tion. The  great  social  revolution  which  caused  the 
fall  in  value  of  the  precious  metals  in  Europe,  is  as 
well  known  as  the  revolution  of  an  opposite  character 
which  had  been  brought  about  at  an  early  period  in 
the  history  of  the  ancient  Roman  republic  by  the  rise 
in  value  of  copper  in  terms  of  which  the  debts  of  the 
plebeians  had  been  contracted.  Without  attempting 
here  to  follow  any  further  the  fluctuations  of  value 
of  the  precious  metals  and  their  effect  on  the  system 
of  bourgeois  political  economy,  it  is  at  once  apparent 
that  a  fall  in  the  value  of  the  precious  metals  favors 
the  debtors  at  the  expense  of  the  creditors,  while  a 
rise  in  their  value  favors  the  creditors  at  the  expense 
of  the  debtors. 

C.      WORLD  MONEY. 

Gold  becomes  money  as  distinguished  from  coin  only 
after  it  is  withdrawn  from  circulation  in  the  shape  of 


202 


a  hoard ;  it  then  enters  circulation  as  a  non-medium  of 
circulation,  and  finally  breaks  through  the  barriers  of 
home  circulation  to  assume  the  part  of  a  universal  equiv- 
alent in  the  world  of  commodities.  It  becomes  world 
money. 

While  the  general  measures  of  weight  of  the  precious 
metals  served  as  their  original  measures  of  value,  the  re- 
verse process  takes  place  now  in  the  world  market,  and 
the  reckoning  names  of  money  are  turned  back  into  cor- 
responding weight  names.  In  the  same  way,  while 
shapeless  crude  metal  (aes  rude)  was  the  original 
form  of  the  medium  of  circulation  and  the  coin  form 
constituted  but  the  official  stamp  certifying  that  a  given 
piece  of  metal  was  of  a  certain  weight,  now  the  preciou? 
metal  in  its  capacity  of  a  world  coin  throws  off  its  stamp 
and  shape  and  reassumes  the  indistinguishable  bullion 
form;  and  even  if  national  coins,  such  as  Eussian  im- 
perials, Mexican  dollars,  and  English  sovereigns,  do  cir- 
culate abroad,  their  name  is  of  no  importance,  and  only 
their  contents  count.  Finally,  as  international  money, 
the  precious  metals  come  again  to  perform  their  original 
function  of  mediums  of  exchange,  which,  like  the  ex^ 
change  of  commodities,  arose  first  not  within  the 
various  primitive  communities,  but  at  their  points  ol 
contact  with  one  another.  As  world  money,  money  thus 
reassumes  its  primitive  form.  On  leaving  the  sphere 
of  home  circulation,  it  strips  off  the  particular  forms 
which  it  has  acquired  in  the  course  of  the  development  of 
the  process  of  exchange  within  that  particular  national 
sphere,  those  local  garbs  of  standard  of  price,  of  coin, 
of  auxiliary  coin,  and  of  token  of  value. 


203 


Vie  have  seen  that  in  the  home  circulation  of  a  coun- 
try, only  one  commodity  serves  as  a  measure  of  value. 
Since,  however,  that  function  is  performed  by  gold  in 
some  countries  and  by  silver  in  others,  there  is  a  double 
standard  of  value  in  the  world  market  and  money  as- 
sumes two  forms  in  all  its  other  functions.  The  transla- 
tion of  the  values  of  commodities  from  gold  prices  into 
silver  prices  and  vice  versa  depends  in  each  case  upon 
the  relative  value  of  the  two  metals,  which  is  constantly 
changing  and,  therefore,  appears  to  be  constantly  in  the 
process  of  determination.  Commodity  owners  in  every 
national  sphere  of  circulation  have  to  use  gold  and  silver 
alternately  for  foreign  circulation  and  thus  to  exchange 
the  metal  which  is  accepted  as  money  at  home  for  the 
metal  which  they  happen  to  need  as  money  abroad. 
Every  nation  is,  therefore,  utilizing  both  metals,  gold 
and  silver,  as  world  money. 

In  the  international  circulation  of  commodities,  gold 
and  silver  appear  not  as  mediums  of  circulation,  but  as 
universal  mediums  of  exchange.  The  universal  medium 
of  exchange  performs  its  function  only  under  its  two 
developed  forms  of  a  means  of  purchase  and  of  a  means 
of  payment,  whose  mutual  relation  in  the  world  market 
is  the  very  reverse  of  what  it  is  at  home.  In  the  sphere 
of  home  circulation,  money  in  the  form  of  coin,  played 
exclusively  the  part  of  a  means  of  purchase,  either  as  the 
intermediary  in  the  dynamic  unity  C — M — C  or  as  the 
representative  of  the  transient  form  of  exchange  value  in 
the  unceasing  change  of  positions  by  commodities.  In 
the  world  market  it  is  just  the  contrary.  Gold  and  sil- 
ver appear  here  as  a  means  of  purchase  when  the  ex- 


—     '^04     — 

change  of  matter  is  but  one-sided,  and  purchase  and 
sale  do  not  coincide.  The  frontier  trade  at  Eliachta 
e.  g.  is  both  actually  and  according  to  treaty,  one  of 
barter,  in  which  silver  plays  only  the  part  of  a  measure 
of  Talue.  The  war  of  1857-58  compelled  the  Chinese  to 
sell  without  buying.  Silver  suddenly  appeared  now  as 
a  means  of  purchase.  Out  of  regard  to  the  letter  of 
the  treaty,  the  Russians  made  up  the  French  five  frank 
coins  into  crude  silver  commodities,  which  were  made  to 
serve  as  a  means  of  exchange.  Silver  has  always  served 
as  a  means  of  purchase  between  Europe  and  America 
on  one  side  and  Asia  on  the  other,  where  it  settles  down 
in  the  form  of  hoards.  Furthermore,  the  precious 
metals  serve  as  international  means  of  purchase  when- 
ever the  ordinary  balance  of  exchange  of  matter  between 
two  nations  is  suddenly  upset,  as  e.  g.  when  a  failure 
of  crops  forces  one  of  them  to  buy  on  an  extraordinary 
scale.  Finally,  the  precious  metals  are  international 
means  of  purchase  in  the  hands  of  gold  and  silver  pro- 
ducing countries,  in  which  case  they  directly  constitute 
a  product  and  commodity  and  not  merely  a  converted 
form  of  a  commodity.  The  more  the  exchange  of  com- 
modities between  different  national  spheres  of  circula- 
tion is  developed,  the  more  important  becomes  the  func- 
tion of  world  money  to  serve  as  a  means  of  payment 
for  the  settlement  of  international  balances. 

Like  home  circulation,  international  circulation  re- 
«[uires  a  constantly  changing  quantity  of  gold  and  silver. 
A  part  of  the  accumulated  hoards  serves  therefore,  in 
each  country  as  a  reserve  fund  of  world  money,  which 
now  declines,  now  rises,  according  to  the  fluctuations  of 


-~     205     — 

the  exchange  of  commodities.*  Besides  the  special  move- 
ments  which  take  place  between  national  spheres  of 
circulation,  world-money  possesses  a  universal  move- 
ment, whose  starting  points  are  at  the  sources  of  produc- 
tion from  which  gold  and  silver  streams  spread  out  in 
different  directions  all  over  the  world  market.  Here 
gold  and  silver  enter  the  world  circulation  as  commodi- 
ties and  are  exclianged  for  commodity  equivalents  in 
proportion  to  the  labor-time  contained  in  them,  before 
they  penetrate  national  spheres  of  circulation.  In  the 
latter,  they  appear  now  with  a  given  magnitude  of  value. 
Every  fall  or  rise  in  the  cost  of  their  production  equally 
affects,  therefore,  their  relative  value  throughout  the 
world  market;  on  the  other  hand,  that  value  is  en- 
tirely independent  of  the  extent  to  which  the  different 
national  spheres  of  circulation  absorb  gold  or  silver.  The 
part  of  the  metal  stream  which  is  caught  up  by  every 
separate  sphere  in  the  world  of  commodities,  partly 
enters  directly  the  home  circulation  of  money  to  make 
up  for  worn  out  coin ;  partly  is  dammed  up  in  the  differ- 
ent reservoirs  containing  hoards  of  coin,  means  of  pay- 
ment and  world-money ;  partly  is  turned  into  articles  of 

*  "II  danaro  ammasaato  supplisce  a  quella  somma,  che  per 
esserc  attualmente  in  circolazione,  per  Teventuale  promiscuita 
de'  commerci  si  allontana  e  sorte  delta  sfera  della  circolazione 
medesima"  (**The  accumulated  money  supplements  that 
amount  which,  in  order  to  be  actually  in  circulation  and  to 
meet  all  possible  perturbations  of  trade,  retires  from  that 
sphere  of  circulation."  (G.  R.  Carli,  note  to  Berri's  "Medi- 
tazioni  sulla  Economia  Politica,"  p.  196,  t.  XV.  of  Custodi's 
1.  c.) 


206 


luxury,  while  the  rest  simply  forms  a  treasure.  At  an 
advanced  stage  of  development  of  the  capitalist  system 
of  production  the  formation  of  hoards  is  reduced  to  the 
minimum  required  by  the  various  processes  of  circula- 
tion for  the  free  play  of  their  mechanism.  The  hoard 
as  such  becomes  idle  wealth,  unless  it  appears  as  a  tem- 
porary form  of  a  surplus  resulting  from  a  favorable  bal- 
ance of  pajrments  or  as  the  result  of  an  interrupted  ex- 
change of  matter,  i.  e.  as  the  solidification  of  a  com- 
modity in  its  first  metamorphosis. 

Gold  and  silver,  in  their  capacity  of  money,  being 
by  conception  imiversal  commodities,  assume  in  their 
capacity  of  world  money  the  form  adapted  to  a 
universal  commodity.  To  the  extent  to  which  all 
commodities  are  exchanged  for  them,  they  become 
the  transformed  impersonation  of  all  commodities 
and,  therefore,  universally  alienable  commodities. 
Their  function  of  serving  as  the  embodiment  of 
universal  labor-time  is  realized  more  and  more  as  the 
interchange  of  matter  produced  by  concrete  labor  em- 
braces increasing  parts  of  the  world.  They  become  uni- 
versal equivalents  to  the  extent  to  which  the  series  of  par- 
ticular equivalents  which  constitute  their  spheres  of  ex- 
change, increases.  Since  in  the  sphere  of  world  circula- 
tion commodities  unfold  their  own  exchange  value  on  a 
imiversal  scale,  they  assume  the  form  of  world  money 
when  transformed  into  gold  and  silver.  As  commodity 
owning  nations  are  thus  turning  gold  into  money  by  their 
diversified  industry  and  universal  trade,  industry  and 
trade  appear  to  them  only  as  a  means  of  getting  money 
out  of  the  world  market  in  the  shape  of  gold  and  silver. 


—    207    — 

Gold  and  silver,  as  world  money,  are,  therefore,  as  much 
products  of  the  universal  circulation  of  commodities  as 
they  are  means  of  widening  its  sphere.  Like  chemistry 
which  grew  up  behind  the  backs  of  the  alchemists  who 
tried  to  find  a  way  of  making  gold,  so  do  the  sources 
of  world  industry  and  world  trade  spring  up  behind  the 
backs  of  the  owners  of  commodities,  while  they  are  hunt- 
ing for  the  commodity  in  its  magic  form.  Gold  and  sil- 
ver help  to  create  the  world  market  by  anticipating  its 
existence  in  their  conception  of  money.  That  this  magic 
effect  of  the  precious  metals  is  by  no  means  confined  to 
the  period  of  infancy  of  capitalist  society  but  is  a  neces- 
sary outgrowth  of  the  perverse  conception  which  the 
representatives  of  the  commodity  world  have  of  their 
own  work  in  society,  is  shown  by  the  extraordinary  in- 
fluence exerted  in  the  middle  of  the  nineteenth  century 
by  the  discovery  of  new  gold  fields. 

Just  as  money  develops  into  world-money,  so  the  com- 
modity owner  develops  into  a  cosmopolitan.  The  cos- 
mopolitan relation  of  men  is  originally  only  a  relation 
of  commodity  owners.  The  commodity  as  such  rises 
above  all  religious,  political,  national,  and  language  bar- 
riers. Price  is  its  universal  language  and  money,  its 
common  form.  But  with  the  development  of  world- 
money  as  distinguished  from  national  coin,  there  de- 
velops the  cosmopolitanism  of  the  commodity  owner  as 
the  faith  of  practical  reason  opposed  to  traditional,  re- 
ligious, national  and  other  prejudices  which  hinder  the 
interchange  of  matter  among  mankind.  As  the  iden- 
tical gold  that  lands  in  England  in  the  form  of  American 
eagles,  turns  there  into  sovereigns  and  three  days  later 


—     208     — 

circulates  in  Paris  in  the  form  of  Napoleons,  only  to 
emerge  in  Venice  in  a  few  weeks  as  so  many  ducats, 
retaining  all  the  while  the  same  value,  it  becomes  clear 
to  the  commodity  owner  that  nationality  "is  but  the 
guinea's  stamp."  The  lofty  idea  which  he  conceives  of 
the  entire  world  is  that  of  a  market,  the  world  market.^ 

4.    THE  PRECIOUS  METALS. 

The  process  of  capitalist  production  first  of  all  takes 
hold  of  the  metallic  circulation  as  of  a  ready,  trans- 
mitted organ  which,  though  undergoing  a  gradual  trans- 
formation, always  retains  tits  fundamental  structure. 
The  question  as  to  why  gold  and  silver  and  not  other 
commodities  serve  as  money  material  falls  outside  the 
limits  of  the  capitalist  system.     We  shall,  therefore. 


'Montanari,  "Delia  Moneta,"  1683,  1.  c,  p.  40.  **E  cosi 
fattamente  diffusa  per  tutto  11  globo  terrestre  la  communica- 
zione  de'  populi  insieme,  che  puo  quasi  dirsi  esaer  11  mondo 
tutto  divinuto  una  sola  citta  in  cui  si  fa  perpetua  fiera  d'ogni 
mercanzia,  e  dove  ogni  uomo  di  tutto  cio  che  la  terra,  gli 
animal!  e  Fumana  industria  altrove  producono,  puo  mediante 
11  danaro  stando  in  sua  casa  provederai  e  godere.  Maravigli- 
osa  invcnzione."  ("The  communication  of  nations  among 
themselves  is  so  widely  extended  all  over  the  globe  that  it 
may  be  almost  said  that  the  entire  world  has  become  one  city 
in  which  a  perpetual  fair  of  merchandise  is  held  and  where 
every  man  may  by  means  of  money  acquire  and  enjoy,  while 
staying  at  home,  all  that  the  earth,  the  animals  and  humc,n 
Industry  produce  elsewhere.    Marvelous  invention!") 


—     209     — 

confine  ourselves  to  summing  up  the  most  essential 
points. 

Since  universal  labor-time  admits  of  quantitative  dif- 
ferences only,  the  object  which  is  to  serve  as  its  specific 
incarnation  must  be  capable  of  representing  purely  quan- 
titative differences,  i.  e.,  it  must  be  homogeneous  and  uni- 
form in  quality  throughout.  That  is  the  first  condition 
a  commodity  must  satisfy  to  perform  the  function  of 
a  measure  of  value.  If  commodities  were  estimated 
in  oxen,  hides,  grain,  etc.,  they  would  really  have 
to  be  estimated  in  an  ideal  average  ox,  or  average  hide, 
since  there  are  qualitative  differences  betwen  an  ox  and 
an  ox,  grain  and  grain,  hide  and  hide.  On  the  contrary, 
gold  and  silver,  as  elementary  substances,  are  always 
the  same,  and  equal  quantities  of  them  represent,  there- 
fore, values  of  equal  magnitude.*  The  other  condition 
which  a  commodity  that  is  to  serve  as  a  universal  equiva- 
lent must  satisfy  and  which  follows  directly  from  its 
function  of  representing  purely  quantitative  differences, 
is  that  it  must  be  capable  of  being  divided  and  re-united 
at  will,  so  that  money  of  account  may  be  represented 


^  I  metalli  han  questo  di  proprio  c  singulare  che  in  essi  soli 
tutte  le  ragioni  si  riducono  ad  una  che  ft  la  loro  quantity,  non 
av€ndo  ricevuto  delle  natura  diversa  qualitd,  nfe  neU'interna 
loro  constituzione  ne  neU'extema  forma  e  fattura."  (Galiani, 
I.  c,  p.  130.)  ("Metals  have  this  singular  property,  that 
everything  in  them  is  reduced  to  one  consideration,  viz.,  that 
of  quantity,  since  they  are  not  endowed  by  nature  with  any 
differences  in  quality  either  in  their  internal  structure  or  in 
their  external  form  and  shape.") 


—    210    — 

materially  as  well.  Gold  and  silver  possess  these  prop- 
erties to  a  superior  degree. 

As  mediums  of  circulation,  gold  and  silver  have  this 
advantage  over  other  commodities,  that  their  high  speci- 
fic gravity  which  condenses  much  weight  in  little  space, 
corresponds  to  their  economic  specific  gravity  which  con- 
denses relatively  much  labor-time,  i.  e.  a  great  quantity 
of  exchange  value  in  a  small  volume.  This  insures 
facility  of  transport,  of  transition  from  hand  to  hand 
and  from  one  country  to  another,  the  ability  to  appear 
as  rapidly  as  to  disappear,  in  short,  that  material  mobil- 
ity which  constitutes  the  sine  qua  non  of  the  com- 
modity that  is  to  serve  as  the  perpetuum  mobile  of  the 
process  of  circulation. 

The  high  specific  value  of  the  precious  metals,  their 
durability,  comparative  indestructibility,  insusceptibility 
of  oxidation  through  the  action  of  the  air,  in  the  case 
of  gold  insolubility  in  acids  except  in  aqua  regia, — 
all  these  natural  properties  make  the  precious  metals 
the  natural  material  for  hoarding.  Peter  Martyr  who 
seems  to  have  been  a  great  lover  of  chocolate,  remarks, 
therefore,  of  the  cacao-bags  which  formed  a  species 
of  Mexican  gold:  "0  felicem  monetam,  quae  suavem 
utilemque  praebet  humano  generi  potum,  et  a  tartarea 
peete  avaritiae  suos  immunes  servat  possessores,  quod 
Buffodi  aut  diu  servari  nequeat.^'  * 


*  De  Orbe  Novo.  "0,  happy  coin,  which  furnishes  mankind 
with  a  pleasant  and  useful  beverage  and  keeps  its  possessors 
immune  from  the  hell-born  peat  of  avarice,  since  it  can  not  be 
either  buried  or  preserved  long." 


—    211    — 

The  great  importance  of  metals  in  general  in  the 
direct  process  of  production  is  due  to  the  part  they 
play  as  instruments  of  production.  Apart  from  their 
scarcity,  the  great  softness  of  gold  and  silver  as  com- 
pared with  iron  and  even  copper  (in  the  hardened  state 
in  which  it  was  used  by  the  ancients),  makes  them  unfit 
for  that  application  and  deprives  them,  therefore,  to  a 
great  extent,  of  that  property  on  which  the  use-value 
of  metals  is  generally  based.  Useless  as  they  are  in 
the  direct  process  of  production,  they  are  easily  dis- 
pensed with  as  means  of  existence,  as  articles  of  con- 
sumption. For  that  reason  any  desired  quantity  of 
them  may  be  absorbed  by  the  social  process  of  circulation 
without  disturbing  the  processes  of  direct  production 
and  consumption.  Their  individual  use-value  does  not 
come  in  conflict  with  their  economic  function.  Further- 
more, gold  and  silver  are  not  only  negatively  super- 
fluous, i.  e.  dispensable  articles,  but  their  aesthetic 
properties  make  them  the  natural  material  of  luxury, 
ornamentation,  splendor,  festive  occasions,  in  short, 
the  positive  form  of  abundance  and  wealth.  They 
appear,  in  a  way,  as  spontaneous  light  brought  out  from 
the  underground  world,  since  silver  reflects  all  rays  of 
light  in  their  original  combination,  and  gold  only  the 
color  of  highest  intensity,  viz.  red  light.  The  sensation 
of  color  is,  generally  speaking,  the  most  popular  form 
of  aesthetic  sense.  The  etymological  connection  between 
the  names  of  the  precious  metals,  and  the  relations  of 
colors,  in  the  different  Indo-Germanic  languages  has 
been  established  by  Jacob  Grimm  (see  his  History  of 
the  German  Language) . 


212 


Finally,  the  susceptibility  of  gold  and  silver  of  being 
turned  from  coin  into  bullion,  from  bullion  into  articles 
of  luxury  and  vice  versa,  i.  e.  the  advantage  they  possess 
as  against  other  commodities  in  not  being  tied  down  to  a 
definite,  exclusive  form  in  which  they  can  be  used,  makes 
them  the  natural  material  of  money,  which  must  con- 
stantly change  from  one  form  to  another. 

Nature  no  more  produces  money  than  it  does  bankers 
or  discount  rates.  But  since  the  capitalist  system  of 
production  requires  the  crystallization  of  wealth  as  a 
fetich  in  the  form  of  a  single  article,  gold  and  silver 
appear  as  its  appropriate  incarnation.  Qold  and  silver 
are  not  money  by  nature,  but  money  is  by  nature  gold 
and  silver.  In  the  first  place,  the  silver  or  gold  money 
crystal  is  not  only  the  product  of  the  process  of  circula- 
tion, but  in  fact  its  only  final  product.  In  the  second 
place,  gold  and  silver  are  ready  and  direct  products  of 
nature,  not  distinguished  by  any  diflLcrence  of  form. 
The  universal  product  of  the  social  process  or  the  social 
process  itself  as  a  product  is  a  peculiar  natural  product, 
a  metal  hidden  in  the  bowels  of  the  earth  and  extracted 
therefrom.  * 

We  have  seen  that  gold  and  silver  are  unable  to  fulfill 

'In  760  a  multitude  of  poor  people  emigrated  to  the  south 
of  Prague  to  wash  the  gold  sand  found  there,  and  three  men 
were  able  to  extract  three  marks  of  gold  a  day.  As  a  result 
of  that  the  run  on  the  "diggings"  and  the  number  of  hands 
taken  away  from  agriculture  became  so  great  that  the  coimtry 
was  visited  by  a  famine  the  following  year.  See  M.  G.  K6mer, 
"Abhandlung  von  dem  Alterthum  des  BChmischen  Bergwerks,** 
Sehneeberg,  1758. 


—     213     — 

the  requirements  which  they  are  expected  to  meet  in 
their  capaxiity  of  money,  viz.  to  remain  values  of  unvary- 
ing magnitude.  Still,  as  Aristotle  had  already  observed, 
they  possess  a  more  constant  value  than  the  average 
of  other  commodities.  Apart  from  the  universal 
effect  of  an  appreciation  or  depreciation  of  the  precious 
metals,  the  fluctuations  in  the  ratio  between  the  values 
of  gold  and  silver  has  a  special  importance,  since  both 
serve  side  by  side  in  the  world  market  as  money  mate- 
riaL  The  purely  economic  causes  of  this  change  of 
value  must  be  traced  to  the  change  in  the  labor-time 
required  for  the  production  of  these  metals;  conquests 
and  other  political  upheavals  which  exercised  a  great 
influence  on  the  value  of  metals  in  the  ancient  world, 
have  nowadays  only  a  local  and  transitory  effect.  The 
labor-time  required  for  the  production  of  the  metals 
will  depend  on  the  degree  of  their  natural  scarcity,  as 
well  as  on  the  greater  or  less  difficulty  with  which  they 
can  be  obtained  in  a  purely  metallic  state.  As  a  matter 
of  fact,  gold  is  the  first  metal  discovered  by  man.  This 
is  due  to  the  fact  that  nature  itself  furnishes  it  partly 
in  pure  crystalline  form,  individualized,  free  from 
chemical  combination  with  other  substances,  or,  as  the 
alchemists  used  to  say,  in  a  virgin  state;  and  so  far  as 
it  does  not  appear  in  that  state,  nature  does  the  technical 
work  in  the  great  gold  washeries  of  rivers.  Only 
the  crudest  kind  of  labor  is  thus  required  of  man 
in  the  extraction  of  gold,  either  from  rivers  or  from 
alluvial  deposits;  while  the  extraction  of  silver  pre- 
Buppoeee  the  development  of  mining  and  a  comparatively 
high   degree  of  technical  skill  generally.     For  that 


—     314    — 

reason  the  value  of  silver  is  originally  greater  than  that 
of  gold  in  spite  of  the  lesser  absolute  scarcity  of  the 
former.  Strabo's  assertion  that  a  certain  Arabian  tribe 
gave  ten  pounds  of  gold  for  one  pound  of  iron  and  two 
pounds  of  gold  for  one  pound  of  silver,  seems  by  no  means 
incredible.  But  as  the  productive  powers  of  labor  in 
society  are  developed  and  the  product  of  unskilled 
labor  rises  in  value  as  compared  with  the  product  of 
skilled  labor;  as  the  earth's  crust  is  more  thoroughly 
broken  up  and  the  original  superficial  sources  of  gold 
supply  give  out,  the  value  of  silver  begins  to  fall  in 
proportion  to  that  of  gold.  At  a  given  stage  of  develop- 
ment of  engineering  and  of  the  means  of  communica- 
tion, the  discovery  of  new  gold  or  silver  fields  become  the 
decisive  factor.  In  ancient  Asia  the  ratio  of  gold  to 
silver  was  6  to  1  or  8  to  1 ;  the  latter  ratio  prevailed  in 
China  and  Japan  as  late  as  the  beginning  of  the  nine- 
teenth century;  10  to  1,  the  ratio  in  Xenophon's  time, 
may  be  considered  as  the  average  ratio  of  the  middle 
period  of  antiquity.  The  exploitation  of  the  Spanish 
silver  mines  by  Carthage  and  later  by  Eome  had  about 
the  same  effect  in  antiquity,  as  the  discovery  of  the 
American  mines  in  modern  Europe.  For  the  period  of 
the  Eoman  empire  15  or  16  to  1  may  be  assumed  as  a 
rough  average,  although  we  frequently  find  cases  of  still 
greater  depreciation  of  silver  in  Eome.  The  same  move- 
ment beginning  with  the  relative  depreciation  of  gold 
and  concluding  with  the  fall  in  the  value  of  silver,  is 
repeated  in  the  following  epoch  which  has  lasted  from 
the  Middle  Ages  to  the  present  time.  As  in  Xenophon's 
times  the  average  ratio  in  the  Middle  Ages  was  10  to  1, 
changing  to  16  or  15  to  1  in  consequence  of  the  discovery 


215 


of  the  American  mines.  The  discovery  of  the  Aus- 
tralian, Califomian  and  Columbian  gold  sources  makes 
a  new  fall  in  the  value  of  gold  probable.* 

c.     THEORIES  OF  THE  MEDITBI  OF  CIRCULA- 
TION  AND  OF  MONEY. 

As  the  universal  thirst  for  gold  prompted  nations  and 
princes  in  the  sixteenth  and  seventeenth  centuries,  the 
period  of  infancy  of  modem  bourgeois  society,  to  cru- 


^  So  far  the  Australian  and  other  discoveries  have  not  af- 
fected the  ratio  of  the  values  of  gold  and  silver.  The  assertions 
to  the  contrary  of  Michel  Chevalier  are  worth  as  much  as  the 
Socialism  of  this  ex-St.  Simonist.  The  quotations  of  silver  on 
the  London  market  prove,  however,  that  the  average  gold 
price  of  silver  during  1850-1858  is  not  quite  3  per  cent,  higher 
than  the  price  during  1830-1850.  But  this  rise  in  price  is 
accounted  for  simply  by  the  Asiatic  demand  for  silver.  In  the 
course  of  the  years  1852-1858  the  price  of  silver  was  chang- 
ing in  certain  years  and  months  only  with  a  change  in  this 
demand,  and  in  no  case  with  the  importation  of  gold  from  the 
newly  discovered  sources.  The  following  is  a  summary  of  the 
gold  prices  of  silver  on  the  London  market. 

PRICE  OF  SILVER  PER  OUNCE. 

Yetu^              March.  July.  November. 

1852  eOVs  pence  60^4  pence  eiyg  pence 

1863  61%  pence  6iy2  pence  61%  pence 

1854  eiyg  pence  61%  pence  61»4  pence 

1855  60%  pence  61  Vi  pence  60%  prace 

1856  60     pence  6I14  pence  62%  pence 

1857  61%  pence  61%  pence  61%  pence 

1868  61%  pence 


—  216  — 

sades  beyond  the  sea  in  search  of  the  golden  grail/  the 
first  interpreters  of  the  modern  world,  the  founders  of 
the  monetary  system,  of  which  the  mercantile  system  is 
but  a  variation,  proclaimed  gold  and  silver,  i.  e.  money, 
as  the  only  thing  that  constitutes  wealth.  They  were 
quite  right  when,  from  the  point  of  view  of  the  simple 
circulation  of  commodities,  they  declared  that  the  mis- 
sion of  bourgeois  society  was  to  make  money,  i.  e.  to 
build  up  everlasting  treasures  which  neither  moth  nor 
rust  could  eat.  It  is  no  argument  with  the  monetary 
system  to  say  that  a  ton  of  iron  whose  price  is  £3  con- 
stitutes a  value  of  the  same  magnitude  as  £3  worth  of 
goldyThe  point  here  is  not  the  magnitude  of  the  ex- 
change value,  but  as  to  what  constitutes  its  adequate 
form.  If  the  monetary  and  mercantile  systems  single 
out  international  trade  and  the  particular  branches  of 
national  industry  directly  connected  with  that  trade 
as  the  only  true  sources  of  wealth  or  money,  it  must  be 
borne  in  mind,  that  in  that  period  the  greater  part  of 
national  production  was  still  carried  on  under  forms 
of  feudalism  and  was  the  source  from  which  producers 
drew  directly  their  means  of  subsistence.  Products,  as 
a  rule,  were  not  turned  into  commodities  nor,  therefore, 
into  money ;  they  did  not  enter  into  the  general  social 
interchange  of  matter;  did  not,  therefore,  appear  as 
embodiments  of  universal  abstract  labor;  and  did  not, 


'"Gold  is  a  wonderful  thing!  WTioever  possesses  it,  is  mas- 
ter of  all  that  he  desires.  By  means  of  gold  even  admission  to 
Heaven  may  be  gained  for  souls."  (Columbus  in  a  letter  from 
Jamaica  in  1503). 


—     217    — 

in  fact,  constitute  bourgeois  wealth.  Money  as  the  end 
and  object  of  circulation  is  exchange  value  or  abstract 
wealth*  bnt  it  is  no  material  element  of  wealth  and  does 
not  form  the  directing  goal  and  impelling  motive  of 
production.  True  to  the  conditions  as  they  prevailed 
in  that  primitive  stage  of  bourgeois  production,  those 
unrecognized  prophets  held  fast  to  the  pure,  tangible, 
and  resplendent  form  of  exchange  value,  to  its  form  of 
a  universal  commodity  as  against  all  special  commod- 
ities. The  proper  bourgeois  economic  sphere  of  that 
period  was  the  sphere  of  the  circulation  of  commodities. 
Hence,  they  judged  the  entire  complex  process  of  bour- 
geois production  from  the  point  of  view  of  that  ele- 
mentary sphere  and  confounded  money  with  capitaL 
The  unceasing  war  of  modem  economists  against  the 
monetary  and  mercantile  system  is  mostly  due  to  the 
fact  that  this  system  blabs  out  in  brutally  naive  fashion, 
the  secret  of  bourgeois  production,  viz.  its  subjection 
to  the  domination  of  exchange  value.  Ricardo,  though 
wrong  in  the  application  he  makes  of  it,  remarks  some- 
where that  even  in  times  of  famine,  grain  is  imported 
not  because  the  nation  is  starving,  but  because  the  grain 
dealer  is  making  money.  In  its  criticism  of  the  mone- 
tary and  mercantile  system,  political  economy,  by  at- 
tacking that  system  as  a  mere  illusion  and  as  a  false 
theory,  fails  to  recognize  in  it  the  barbaric  form  of  its 
own  fundamental  principles.  Furthermore,  this  sjrstem 
has  not  only  an  historic  justification,  but  within  certain 
spheres  of  modern  economy  retains  until  now  the  full 
rights  of  citizenship.  At  all  stages  of  the  bourgeois 
system  of  production  in  which  wealth  assumes  the  ele- 


—    218    — 

mentary  form  of  a  commodity,  exchange  value  assumes 
the  elementary  form  of  money  and  in  all  phases  of  the 
process  of  production  wealth  reassumes  for  a  moment 
the  universal  elementary  commodity  form.  Even  at 
the  most  advanced  stage  of  bourgeois  economy,  the 
specific  functions  of  gold  and  silver  to  serve  as  money, 
in  contradistinction  to  their  function  of  mediums  of 
circulation — a  function  which  distinguishes  them  from 
all  other  commodities — is  not  done  away  with,  but  only 
limited,  hence  the  monetary  and  mercantile  system  re* 
tains  its  right  of  citizenship.  The  Catholic  fact  that 
gold  and  silver  are  contrasted  with  other  profane  com- 
modities as  the  direct  incarnation  of  social  labor,  that 
is  as  the  expression  of  abstract  wealth,  naturally  offends 
the  Protestant  point  d'honneur  of  bourgeois  economy, 
and  out  of  fear  of  the  prejudices  of  the  monetary  system 
it  had  lost  for  a  long  time  its  grasp  of  the  phenomena 
of  money  circulation,  as  will  be  shown  presently. 

It  was  quite  natural  that,  contrary  to  the  monetary 
and  mercantile  system  which  knew  money  only  in  its 
form  of  a  crystallized  product  of  circulation,  classical 
political  economy  should  have  conceived  money  first  of 
all  in  its  fluent  form  of  exchange  value  arising  and  dis- 
appearing within  the  process  of  the  metamorphosis  of 
commodities.  And  since  the  circulation  of  commodities 
is  regarded  exclusively  in  the  form  of  C — M— C  and  the 
latter  in  its  turn,  exclusively  in  its  aspect  of  a  dynamic 
unity  of  sale  and  purchase,  money  comes  to  be  regarded 
in  its  capacity  of  a  medium  of  circulation  as  opposed  to 
its  capacity  of  money.  And  when  that  medium  of  cir- 
culation is  isolated  in  its  function  of  coin,  it  turns,  as 


—    219    — 

we  have  seen,  into  a  token  of  value.  But  since  classical 
political  economy  had  to  deal  with  metallic  circulation 
as  the  prevailing  form  of  circulation,  it  defined  metallic 
money  as  coin,  and  metallic  coin  as  a  mere  token  of 
value.  In  acordance  with  the  law  governing  the  circula- 
tion of  tokens  of  value,  the  proposition  was  advanced 
that  the  prices  of  commodities  depend  on  the  quantity 
of  money  in  circulation  instead  of  the  opposite  principle 
that  the  quantity  of  money  in  circulation  depends  on 
the  prices  of  commodities.  We  find  this  view  more  or 
less  clearly  expressed  by  the  Italian  economists  of  the 
seventeenth  century;  LOCKE  now  asserts,  now  denies 
that  principle ;  it  is  clearly  elaborated  in  the  "Spectator" 
(of  October  19,  1711)  by  MONTESQUIEU  AND 
HUME.  Since  Hume  was  by  far  the  most  important 
representative  of  this  theory  in  the  eighteenth  century, 
we  shall  commence  our  review  with  him. 

Under  certain  assumptions,  an  increase  or  decrease 
in  the  quantity  either  of  the  metallic  money  in  circula- 
tion, or  of  the  tokens  of  value  in  circulation  seems  to 
affect  uniformly  the  prices  of  commodities.  With  each 
fall  or  rise  of  the  value  of  gold  or  silver  in  which  the 
exchange  values  of  commodities  are  estimated  as  prices, 
there  is  a  rise  or  fall  of  prices,  because  of  the  change  in 
their  measure  of  value ;  as  a  result  of  the  rise  or  fall  of 
prices,  a  greater  or  smaller  quantity  of  gold  and  silver 
is  circulating  as  coin.  But  the  apparent  phenomenon 
is  the  fall  in  prices — the  exchange  value  of  commodities 
remaining  the  same — accompanied  by  an  increased  or 
diminished  quantity  of  the  medium  of  circulation.  On 
the  other  hand,  if  the  quantity  of  tokens  of  value  rises 


—     220    — 

above  or  falls  below  its  required  level,  it  is  forcibly 
reduced  to  the  latter  by  a  fall  or  rise  of  prices.  In 
either  case  the  same  effect  seems  to  be  brought  about 
by  the  same  cause,  and  Hume  holds  fast  to  this  sem- 
blance. 

Every  scientific  inquiry  into  the  relation  between  the 
volume  of  the  circulating  medium  and  the  movement 
of  prices  must  assume  the  value  of  the  money  material  as 
given.  Hume,  on  the  contrary,  considers  exclusively 
periods  of  revolution  in  the  value  of  the  precious  metals, 
i.  e.  revolutions  in  the  measure  of  value.  The  rise  of 
prices  which  occurred  simultaneously  with  the  increase 
of  metallic  money  after  the  discovery  of  the  American 
mines  forms  the  historical  background  of  his  theory, 
while  his  polemic  against  the  monetary  nnd  mercantile 
system  furnishes  its  practical  motive.  The  importation 
of  precious  metals  can  naturally  increase  while  their  cost 
of  production  remains  the  same.  On  the  other  hand,  a 
decrease  in  their  value,  i.  e.  in  the  labor-time  required 
for  their  production  will  reveal  itself  first  of  all  in 
their  increased  imports.  Hence,  said  the  later  followers 
of  Hume,  a  decrease  in  the  value  of  the  precious  metals, 
reveals  itself  in  an  increased  volume  of  the  circulating 
medium,  and  the  increased  volume  of  the  latter  is  shown 
in  the  rise  of  prices.  As  a  matter  of  fact,  however,  the 
rise  in  price  affects  only  exported  commodities,  which  are 
exchanged  for  gold  and  silver  as  commodities  and  not 
as  mediums  of  circulation.  Thus,  the  prices  of  these 
commodities,  which  are  now  estimated  in  gold  and  sil- 
ver of  lower  value,  rise  as  compared  with  the  prices  of 
•11  other  commodities  whose  exchange  value  contiBtoes 


—     221     — 

to  be  estimated  in  gold  or  silver  according  to  the  stand- 
ard of  their  old  cost  of  production.  This  two-fold  ap- 
praisement of  the  exchange  values  of  commodities  in 
the  same  c-ountry  can  naturally  be  only  temporary,  and 
the  gold  and  silver  prices  must  become  equalized  in  the 
proportions  determined  by  the  exchange  values  them- 
selves, so  that  finally  the  exchange  values  of  all  com- 
modities come  to  be  estimated  according  to  the  new  value 
of  the  money  material.  The  development  of  this  pro- 
cess, as  well  as  the  ways  and  means  in  which  the 
exchange  value  of  commodities  asserts  itself  within  the 
limits  of  the  fluctuations  of  market  prices,  do  not  fall 
within  the  scope  of  this  work.  But  that  this  equaliza- 
tion takes  place  but  gradually  in  the  early  periods  of 
development  of  bourgeois  production  and  extends  over 
long  periods  of  time,  never  keeping  pace  with  the  in- 
crease of  cash  in  circulation,  has  been  strikingly  demon- 
strated by  new  critical  investigations  of  the  movement 
of  prices  of  commodities  in  the  sixteenth  century.^  The 
favorite  references  of  Hume's  followers  to  the  rise  of 
prices  in  ancient  Rome  in  consequence  of  the  conquests 
of  Macedonia,  Egypt  and  Asia  Minor,  are  quite  irrele- 
vant. The  characteristic  method  of  antiquity  of  sud- 
denly transferring  hoarded  treasures  from  one  country 
to  another,  which  was  accomplished  by  violence  and  thus 
brought  about  a  temporary  reduction  of  the  cost  of 


'The  slowness  of  the  process  was  admitted  by  Hume,  al- 
though it  but  little  agrees  with  his  principle.  See  David  Hume 
"Essays  and  Treatises  on  several  subjects."  London,  1777,  v. 
1,  p.  300. 


—     223     — 

production  of  precious  metals  in  a  certain  country  by 
the  simple  process  of  plunder,  aiffects  just  as  little  the 
intrinsic  laws  of  money  circulation,  as  the  gratuitous 
distribution  of  Egyptian  and  Sicilian  grain  in  Rome 
affected  the  universal  law  governing  the  price  of  grain. 
Hume,  as  well  as  all  other  writers  of  the  eighteenth 
century,  was  not  in  possession  of  the  material  necessary 
for  the  detailed  observation  of  the  circulation  of  money. 
This  material,  which  first  becomes  available  with  the  full 
development  of  banking,  includes  in  the  first  place  a 
critical  history  of  prices  of  commodities,  and  in  the  sec- 
ond, official  and  current  statistics  relating  to  the  expan- 
sion and  contraction  of  the  circulating  medium,  the  im- 
ports and  exports  of  the  precious  metals,  etc.  Hume's 
theory  of  circulation  may  be  summed  up  in  the  follow- 
ing propositions:  1.  The  prices  of  commodities  in 
a  country  are  determined  by  the  quantity  of  money 
existing  there  (real  or  symbolic  money) ;  2.  The  money 
current  in  a  country  represents  all  the  commodities  to 
be  found  there.  In  proportion  "as  there  is  more  or  less 
of  this  representation,''  i.  e.  of  money,  ''there  goes  a 
greater  or  less  quantity  of  the  thing  represented  to  the 
same  quantity  of  it";  3.  If  commodities  increase  in 
quantity,  their  price  falls  or  the  value  of  money  rises. 
If  money  increases  in  quantity,  then,  on  the  contrary, 
the  price  of  commodities  rises  and  the  value  of  money 
declines.' 

'The  deamess  of  everything,'*  says  Hume,  "from 
plenty  of  money,  is  a  disadvantage,  which  attends  an 

» Conf.  Steuart,  1,  c.  v.  I,  p.  394-400. 


—     223     — 

established  commerce,  and  sets  bounds  to  it  in  every 
country,  by  enabling  the  poorer  states  to  undersell  the 
richer  in  all  foreign  markets."^  "Where  coin  is  in  great- 
er plenty ;  as  a  greater  quantity  of  it  is  required  to  repre- 
sent the  same  quantity  of  goods;  it  can  have  no  effect, 
either  good  or  bad,  taking  a  nation  within  itself;  any 
more  than  it  would  make  an  alteration  on  a  merchant's 
books,  if,  instead  of  the  Arabian  method  of  notation, 
which  requires  few  characters,  he  should  make  use  of 
the  Roman,  which  requires  a  great  many.  Nay,  the 
greater  quantity  of  money,  like  the  Roman  characters, 
is  rather  inconvenient,  and  requires  greater  trouble 
both  to  keep  and  transport  it."  ^  In  order  to  prove  any- 
thing, Hume  should  have  shown  that  under  a  given 
system  of  notation  the  quantity  of  characters  used  does 
not  depend  on  the  magnitude  of  the  nimibers,  but  that 
on  the  contrary,  the  magnitude  of  the  numbers  depends 
on  the  quantity  of  the  characters  used.  It  is  perfectly 
true  that  there  is  no  advantage  in  estimating  or  *'count- 
ing"  values  of  commodities  in  depreciated  gold  and 
silver,  and  that  is  the  reason  why  nations  have  always 
found  it  more  convenient  with  the  growth  of  the  value 
of  the  commodities  in  circulation  to  count  in  silver  in 
preference  to  copper,  and  in  gold  rather  than  in  silver. 
In  proportion  as  the  nations  became  richer,  they  con- 
verted the  less  valuable  metals  into  subsidiary  coin  and 
the  more  valuable  ones  into  money.  Furthermore,  Hume 
forgets  that  in  order  to  count  values  in  gold  and  silver, 

*  David  Hume,  1.  c.  p.  300. 

•  David  Hume,  1.  c.  p.  303. 


—     224     — 

it  is  not  necessary  that  either  gold  or  silver  should  be 
"on  hand/^  Money  of  account  and  the  medium  of  cir- 
culation are  identical  with  him  and  both  are  "coin." 
Hume  concludes  that  a  rise  or  fall  of  prices  depends 
on  the  quantity  of  money  in  circulation,  because  a 
change  in  the  value  of  the  measure  of  value,  i.  e.  of 
the  precious  metals  which  serve  as  money  of  account, 
causes  a  rise  or  fall  of  prices  and,  consequently,  also  a 
change  in  the  amount  of  money  in  circulation,  the  rap- 
idity of  the  latter  remaining  the  same.  That  not  only 
the  quantity  of  gold  and  silver  increased  in  the  sixteenth 
and  seventeenth  centuries,  but  that  the  cost  of  their  pro- 
duction had  declined  at  the  same  time,  Hume  could  know 
from  the  closing  up  of  the  European  mines.  In  the  six- 
teenth and  seventeenth  centuries  the  prices  of  commodi- 
ties increased  in  Europe  with  the  influx  of  the  mass  of 
American  gold  and  silver;  hence  the  prices  of  com- 
modities in  every  land  are  determined  by  the  mass 
of  gold  and  silver  to  be  found  there.  This  was  Hume's 
first  "necessary  consequence."^  In  the  sixteenth  and 
seventeenth  centuries  prices  had  not  risen  uniformly  with 
the  increase  of  the  quantity  of  precious  metals;  more 
than  half  a  century  passed  before  any  change  in  prices 
became  perceptible,  and  even  then  it  took  a  long  time 
before  the  exchange  values  of  commodities  came  to  be 
generally  estimated  according  to  the  depreciated  value 
of  gold  and  silver,  i.  e.  before  the  revolution  affected 
the  general  price  level.  Hence,  concludes  Hume,  who, 
quite  contrary  to  the  principles  of  his  philosophy,  gen- 

*  David  Hume,  1.  c.  p.  303. 


—     225     — 

eralizes  indiscriminately  from  imperfectly  observed 
facts,  prices  of  commodities  or  the  value  of  money  de- 
pend not  on  the  total  amount  of  money  to  be  found 
in  the  country,  but  rather  on  the  quantity  of  gold  and 
silver  which  is  actually  in  circulation;  but  in  the  long 
run  all  the  gold  and  silver  in  the  country  must  be 
sf  absorbed  by  circulation  in  the  form  of  coin/  It  is 
clear  that  if  gold  and  silver  have  a  value  of  their  own, 
then,  apart  from  all  other  laws  of  circulation,  only  a 
definite  quantity  of  gold  and  silver  can  circulate  as  the 
equivalent  of  commodities  of  a  given  value.  If,  there- 
fore, every  quantity  of  gold  and  silver  which  happens 
to  be  in  a  country  must  enter  the  sphere  of  exchange  of 
commodities  as  a  medium  of  circulation  without  regard 
to  the  total  value  of  the  commodities,  then  gold  and 
silver  have  no  intrinsic  value  and  are  in  fact  no  real 
commodities.  That  is  Hume's  third  "necessary  conse- 
quence." He  makes  commodities  enter  the  process  of 
circulation  without  price  and  gold  and  silver  without 
value.    That  is  the  reason  why  he  never  speaks  of  the 


»  David  Hume,  1.  c.  p.  307,  308,  303 :  "It  is  evident,  that  the 
prices  do  not  so  much  depend  on  the  absolute  quantity  of  com- 
modities,  and  that  of  money,  which  are  in  a  nation,  as  on  that 
of  the  commodities,  which  can  or  may  come  to  market,  and  of 
the  money  which  circulates.  If  the  coin  be  locked  up  in  chests, 
it  is  the  same  thing  with  regard  to  prices,  as  if  it  were  anni- 
hilated; if  the  commodities  be  hoarded  in  magazines  and 
granaries,  a  like  effect  follows.  As  the  money  and  commodities 
in  these  cases,  never  meet,  they  cannot  affect  each  other.  The 
whole  (of  prices)  at  last  reaches  a  just  proportion  toith  the 
neto  quantity  of  specie  which  is  in  the  kingdom." 


—     226     — 

value  of  commodities  and  of  gold,  but  onfy  of  their 
relative  quantities.  Locke  had  already  said  that  gold 
and  silver  had  merely  an  imaginary  or  conventional 
value;  the  first  brutal  expression  of  opposition  to  the 
assertion  of  the  monetary  "system"  that  gold  and  silver 
alone  have  true  value.  That  gold  and  silver  owe  their 
character  of  money  to  the  function  they  perform  in 
the  social  process  of  exchange  is  interpreted  to  the  effect 
that  they  owe  their  own  value  and  therefore  the  magni- 
tude of  their  value  to  a  social  function.*  Gold  and 
silver  are  thus  worthless  things,  which,  however,  acquire 
a  fictitious  value  within  the  sphere  of  circulation  as 
representatives  of  commodities.  They  are  converted  by 
the  process  of  circulation  not  into  money,  but  into  value. 
This  value  of  theirs  is  determined  by  the  proportion 
between  their  own  volume  and  that  of  the  commodities, 
since  the  two  must  balance  each  ether.  Thus,  Hume 
makes  gold  and  silver  enter  the  world  of  commodities 
as  non-commodities;  but  as  soon  as  they  appear  in  the 
form  of  coin,  he  turns  them,  on  the  contrary,  into  mere 
commodities,  which  must  be  exchanged  for  other  com- 
modities by  simple  barter.  In  that  manner,  if  the  world 
of  commodities  consisted  of  but  one  commodity,  say  one 
million  quarters  of  grain,  the  idea  would  work  itself 
out  very  simply;  viz.,  one  quarter  of  grain  would  be 
exchanged  for  two  ounces  of  gold  if  there  were  alto- 
gether two  million   ounces   of  gold,   and   for  twenty 

'  See  Law  and  Frcmklin  about  surplus  value  which  gold  and 
silver  are  supposed  to  acquire  from  their  function  of  money. 
Also  Forhonnaifi. 


227 


ounces  of  gold,  if  there  were  a  total  of  twenty  million 
ounces,  the  price  of  the  commodity  and  the  value  of 
money  rising  or  falling  in  inverse  ratio  to  the  quantity 
of  gold  in  existence/  But  the  world  of  commodities 
consists  of  an  endless  variety  of  use-values,  whose  rela- 
tive values  are  by  no  means  determined  by  their  relative 
quantities.  How,  then,  does  Hume  conceive  this  ex- 
change of  the  volume  of  commodities  for  the  volume  of 
V  gold  ?  He  contents  himself  with  the  meaningless,  hollow 
idea  that  every  commodity  is  exchanged  as  an  aliquot 
pari;  of  the  entire  volume  of  commodities  for  a  corre- 
Bponding  aliquot  pari;  of  the  volume  of  gold.  The 
process  of  the  movement  of  commodities  due  to  the 
antagonism  between  exchange  value  and  use-value  which 
commodities  bear  within  themselves,  and  which  mani- 
fests itself  in  the  circulation  of  money,  becoming  cry- 
etallized  in  diJfferent  forms  of  the  latter,  is  thus  done 
away  with,  giving  place  to  the  imaginary  mechanical 
equalization  process  between  the  quantity  of  precious 
metals  to  be  found  in  a  country  and  the  volume  of  com- 
modities existing  there  at  the  same  time. 

SIR  JAMES  STEUART  opens  his  inquiry  into  the 
nature  of  coin  and  money  with  an  elaborate  criticism  of 
Hume  and  Montesquieu.^  He  is  really  the  first  to  ask 
this  question:  is  the  quantity  of  current  money  deter- 


*  This  fiction  is  literally  advanced  by  Montesquieu.  [The  pas- 
sage from  Montesquieu  is  quoted  by  Marx  in  his  Capital,  v.  I. 
Part  1,  Ch.  Ill,  section  2,  b,  foot-note.  Note  by  K.  Kautsky  to 
2nd  German  edition]. 

'  Steuart,  1.  c.  v.  I.,  p.  394  seq. 


— .    228     — 

mined  by  the  prices  of  commodities,  or  are  the  prices  of 
commodities  determined  by  the  quantity  of  current 
money?  Although  his  analysis  is  obscured  by  his 
fantastic  conception  of  the  measure  of  value,  his 
vacillating  view  of  exchange  value  and  by  remi- 
niscences of  the  mercantile  system,  he  discovers 
the  essential  forms  of  money  and  the  general  laws  of  the 
circulation  of  money,  because  he  makes  no  attempt  at  a 
mechanical  separation  of  commodities  from  money,  but 
proceeds  to  develop  its  different  functions  from  the 
different  aspects  of  the  exchange  of  commodities.  Money 
is  used,  he  says,  for  two  principal  purposes :  for  the  pay- 
ment of  debts  and  for  the  purchase  of  what  one  needs ; 
the  two  together  form  "ready  money  demands/'  The 
state  of  trade  and  industry,  the  mode  of  living,  the 
customary  expenditures  of  the  people,  taken  all  to- 
gether regulate  and  determine  the  volume  of  "ready 
money  demands,"  i.  e.  the  number  of  "alienations."  In 
order  to  effect  this  multitude  of  payments,  a  certain  pro- 
portion of  money  is  required.  This  proportion  may  in- 
crease or  decrease  according  to  circumstances,  even  while 
the  number  of  alienations  remains  the  same.  At  any 
rate,  the  circulation  of  a  country  can  absorb  only  a 
definite  quantity  of  money.*  "It  is  the  complicated 
operations  of  demand  and  competition  which  determines 
ihe  standard  price  of  everything" ;  the  latter  "does  not 
in  the  least  depend  on  the  quantity  of  gold  and  silver 


'Steuart,  1.  c,  v.  2,  p.  377-379  passim   (not  found  in  the 
1767  London  edition.    Translator). 


—  229  — 

in  the  country/"  What  then  will  become  of  the  gold 
and  silver  that  is  not  required  as  coin  ?  They  are  hoard- 
ed or  used  in  the  manufacture  of  articles  of  luxury.  If 
the  quantity  of  gold  and  silver  fall  below  the  level 
required  for  circulation,  symbolic  money  or  other  sub- 
stitutes take  its  place.  If  a  favorable  rate  of  exchange 
brings  about  a  surplus  of  money  in  the  country  and 
cuts  off  at  the  same  time  the  demand  for  its  shipment 
abroad,  it  will  accumulate  in  strong-boxes,  where  the 
"riches  will  remain  without  producing  more  effect  than 
if  they  had  remained  in  the  mine." 

The  second  law  discovered  by  Steuart  is  that  of  the 
reflux  of  credit  circulation  to  its  starting  point.  Finally, 
he  works  out  the  effects  which  the  disparity  of  the  rates 
of  interest  in  different  countries  produces  upon  the  in- 
ternational export  and  import  of  precious  metals.  The 
last  two  points  we  mention  here  only  for  the  sake  of 
completeness,  since  they  have  but  a  remote  bearing  on 
the  subject  of  our  discussion.*  Symbolic  money  or  credit 

*  Steuart,  1.  c,  p.  379-380  passim  (London,  1767  edition,  r. 
1.  p.  400.     Transl.). 

**'The  additional  coin  will  be  locked  up,  or  converted  into 
plate.  ...  As  for  the  paper  money,  so  soon  as  it  has  served 
the  first  purpose  of  supplying  the  demand  of  him  who  borrowed 
it,  it  will  return  upon  the  debtor  in  it  and  become  realized. 
.  .  .  Let  the  specie  of  a  country,  therefore,  be  augmented  or 
diminished  in  ever  so  great  a  proportion,  commodities  will  still 
rise  and  fall  according  to  the  principles  of  demand  and  com- 
petition, and  these  will  constantly  depend  upon  the  inclinations 
of  those  who  have  property  or  any  kind  of  equivalent  whatso- 


—    230    — 

money — Steuart  does  not  as  yet  distinguish  between 
the  two  forms  of  money — may  take  the  place  of  precious 
metals  as  a  means  of  purchase  or  means  of  payment  in 
the  sphere  of  home  circulation,  but  never  in  the  world 


ever  to  give,  but  never  upon  the  quantity  of  coin  they  are  pos- 
sessed of.  .  .  Let  it  (namely,  the  quantity  of  specie  in  a 
country)  be  ever  so  low,  while  there  is  real  property  of  any 
denomination  in  the  country,  a  competition  to  consume  in  those 
who  possess  it,  prices  will  be  high,  by  the  means  of  barter, 
symbolical  money,  mutual  prestations  and  a  thousand  other  in- 
ventions. ...  If  this  country  has  a  communication  with 
other  nations,  there  must  be  a  proportion  between  the  prices 
of  many  kinds  of  merchandize  there  and  elsewhere,  and  a  sud- 
den augmentation  or  diminution  of  the  specie,  supposing  it 
could  of  itself  operate  the  effects  of  raising  or  sinking  prices, 
would  be  restrained  in  its  operation  by  foreign  competition." 
1.  e.  V.  1,  p.  400-402.  "The  circulation  of  every  country  must 
be  in  proportion  to  the  industry  of  the  inhabitants  producing 
the  commodities  which  come  to  market.  .  .  If  the  coin  of  a 
country,  therefore,  falls  below  the  proportion  of  the  price  of  in- 
dustry offered  to  sale,  inventions,  like  symbolical  money,  will  be 
fallen  upon,  to  provide  for  an  equivalent  for  it.  But  if  the 
specie  be  found  above  the  proportion  of  industry,  it  wm  have 
no  effect  in  raising  prices,  nor  will  it  enter  into  circulation:  it 
will  be  hoarded  up  in  treasures.  .  .  .  Whatsoever  be  the 
quantity  of  money  in  a  nation,  in  correspondence  with  the  rest 
of  the  worldj  there  never  can  remain  in  circulation,  but  the 
quantity  nearly  proportional  to  the  consumption  of  the  rich 
and  to  the  labour  and  industry  of  the  poor  inhabitants,"  and 
this  proportion  is  not  determined  "by  the  quantity  of  money 
actually  in  the  country"  (1.  c.  p.  403-408  passim.)  "All  na- 
tions will  endeavor  to  throw  their  ready  money,  not  necessary 
for  their  own  circulation,  into  that  country  where  the  interest 
of  money  is  high  with  respect  to  their  own."     (1.  c.  v.  2.  p.  5). 


231 


market.  Paper  notes  are  therefore  ''money  of  the  so- 
ciety," while  gold  and  silver  are  "money  of  the  world."  ^ 
It  is  characteristic  of  nations  with  an  "historical"  de- 
velopment, in  the  sense  in  which  the  term  is  used  by 
the  historical  school  of  law,  to  keep  forgetting  their 
own  history.  Although  the  controversy  as  to  the  rela- 
tion of  prices  of  commodities  to  the  volume  of  the 
circulating  medium  has  been  continually  agitating  Par- 
liament for  the  last  half  a  century,  and  has  precipitated 
in  England  thousands  of  pamphlets,  large  and  small, 
Steuart  has  remained  even  more  of  a  "dead  dog"  than 
Spinoza  seemed  to  be  to  Moses  Mendelson  in  Lessing's 
time.  Even  the  latest  writer  on  the  history  of  ^*cur- 
rency,"  Maclaren,  makes  Adam  Smith  the  original  au- 
thor of  Steuart^s  theory,  and  Eicardo  of  Hume's  theory.- 

"The  richest  nation  in  Europe  may  be  the  poorest  in  circulating 
specie."  1,  c,  v.  2,  p.  6.  For  the  polemics  against  Steuart  see 
Arthur  Young.  [In  his  foot-note  in  Capital,  v.  1,  Part  1,  ch. 
III.,  section  2,  b.  p.  62,  Humboldt  ed.,  Marx  says :  The  theory 
of  Hume  was  defended  against  the  attacks  of  J.  Steuart  and 
others,  by  A.  Young,  in  his  "Political  Arithmetic,"  London, 
1774,  in  which  work  there  is  a  special  chapter  entitled  "Prices 
depend  on  quantity  of  money."  Note  by  K.  Kautsky  to  2nd 
German  edition]. 

*  Steuart,  1.  e.,  v.  2,  p.  370.  Louis  Blanc  translates  the  ex- 
pression "money  of  the  society"  which  stands  for  home  or  na- 
tional money,  as  socialist  money,  which  is  perfectly  meaning- 
less and  makes  a  Socialist  of  John  Law.  (See  the  first  voliune 
of  his  History  of  the  French  Revolution) , 

'Maclaren,  1.  c.  p.  43  seq.  Patriotism  led  Gustav  Julius,  a 
German  writer  who  met  with  very  early  death,  to  hold  up  old 
Biish  as  an  authority  as  against  the  Ricardian  school.    Honest 


—     232     — 

While  Eicardo  elaborated  Hume's  theory,  Adam  Smith 
registered  the  results  of  Steuart's  investigations  as 
dead  facts.  Adam  Smith  applied  the  Scotch  say- 
ing that  "mony  mickles  mak  a  muckle"  even  to  his 
spiritual  wealth,  and  therefore  concealed  with  petty 
care  the  sources  to  which  he  owed  the  little  out  of  which 
he  tried  to  make  so  much.  More  than  once  he  prefers 
to  break  off  the  point  of  the  discussion,  whenever  he  feels 
that  an  attempt  on  his  part  clearly  to  formulate  the 
question  would  compel  him  to  settle  his  accounts  with 
his  predecessors.  So  in  the  case  of  the  money  theory. 
He  tacitly  adopts  Steuart's  theory  when  he  says  that 
the  gold  and  silver  existing  in  a  country  is  partly 
utilized  as  coin;  partly  accumulated  in  the  form  of 
reserve  funds  for  merchants  in  countries  without  banks, 
or  of  bank  reserves  in  countries  with  a  credit  currency ; 
partly  serves  as  a  hoard  for  the  settling  of  international 
payments ;  partly  is  turned  into  articles  of  luxury.  He 
passes  over  without  remark  the  question  as  to  the  quan- 
tity of  coin  in  circulation,  treating  money  quite  wrongly 
as  a  mere  commodity.*    His  vulgarizer,  the  dull  J.  B. 

Bilscfa  rendered  Steuart's  elegant  English  into  Hamburg  Piatt 
and  by  trying  to  improve  upon  the  original  spoiled  it  as  often 
as  he  could. 

*  Note  to  the  2nd  edition :  This  is  not  an  exact  statement. 
Adam  Smith  expresses  the  law  correctly  on  many  occasions. 
[See  Capital,  Humboldt  edition,  p.  62,  ft-note  1,  where  writing 
seven  years  later ,  Marx  makes  the  following  qualification : 
"This  statement  applies  only  in  so  far  as  Adam  Smith,  ex  officio, 
treats  of  money.  Now  and  then,  however,  as  in  his  criticism  of 
the  earlier  systems  of  political  economy,  he  takes  the  right 


—  233  — 

Say,  whom  the  French  have  proclaimed  prince  de  la 
science — like  Johann  Christoph  Gottsched,  who  pro- 
claimed his  Schonaich  a  Homer  and  himself  a  Pietro 
Aretino  to  the  terror  principum  and  lux  mundi — has 
with  great  pomp  raised  this  not  altogether  innocent 
oversight  of  Adam  Smith  to  a  dogma/  It  must  be  said, 
however,  that  his  hostile  attitude  to  the  illusions  of  the 
mercantile  system  prevented  Adam  Smith  from  taking 
an  objective  view  of  the  phenomena  of  metallic  circula- 
tion, while  his  views  on  credit  money  are  original  and 
deep.  As  in  the  eighteenth  century  petrification  theories 
there  is  always  felt  the  presence  of  an  undercurrent 
which  springs  from  either  a  critical  or  apologetic  atti- 
tude toward  the  biblical  tradition  of  the  flood,  so  there 
is  concealed  behind  all  the  money  theories  of  the  eigh- 
teenth century  a  secret  struggle  with  the  monetary 
system,  the  ghost  which  had  stood  guard  over  the  cradle 

view.  'The  quantity  of  coin  in  every  country  is  regulated  by 
the  value  of  the  commodities  which  are  to  hs  circulated  by  it. 
.  .  .  The  value  of  the  goods  annually  bought  and  sold  in  any 
country  requires  a  certain  quantity  of  money  to  circulate  and 
distribute  them  to  their  proper  consumers,  and  can  give  em- 
ployment to  no  more.  The  channel  of  circulation  necessarily 
draws  to  itself  a  sum  sufficient  to  fill  it,  and  never  admits 
any  more.*    Wealth  of  Nations,  Book  iv.,  oh.  I.*'] 

'The  distinction  between  currency  and  money  is  therefore 
not  found  in  "Wealth  of  Nations."  Deceived  by  the  apparent 
impartiality  of  Adam  Smith,  who  knew  his  -Hume  and  Steuart 
very  well,  honest  Maclaren  remarks:  "The  theory  of  the  de- 
pendence of  prices  on  the  extent  of  the  currency  had  not  as  yet, 
attmcted  attention;  and  Doctor  Smith,  like  Mr.  Locke  (Locke 
undergoes  a  change  in  his  view),  considers  metallic  money 
nothing  but  a  commodity."    Maclaren,  1.  c.  p.  44. 


—     234     — 

of  bourgeois  economy  and  continued  to  throw  its  shadow 
over  legislation. 

In  the  nineteenth  century,  inquiries  into  the  nature 
of  money  were  not  prompted  directly  by  phenomena  of 
metallic  circulation,  but  rather  by  those  of  banknote 
circulation.  The  former  was  touched  upon  only  in  order 
to  discover  the  laws  governing  the  latter.  The  suspen- 
sion of  specie  payments  by  the  Bank  of  England  in 
1797,  the  rise  of  prices  of  many  commodities  which 
followed  it,  the  fall  of  the  mint  price  of  gold  below 
its  market  price,  the  depreciation  of  bank-notes,  espe- 
cially since  1809,  furnished  the  direct  practical  occasion 
for  a  party  struggle  in  parliament  and  a  theoretical 
tournament  outside  of  it,  both  conducted  with  like  pas- 
sion. The  historical  background  for  the  controversy 
was  furnished  by  tiie  history  of  paper  money  during 
the  eighteenth  century:  the  fiasco  of  LaVs  bank;  the 
depreciation  of  the  provincial  bank-notes  of  the  English 
Colonies  in  North  America  from  the  beginning  to  the 
middle  of  the  eighteenth  century  which  went  hand  in 
hand  with  the  increase  in  the  number  of  tokens  of  value ; 
further,  the  Continental  bills  issued  as  legal  tender  by 
the  American  government  during  the  War  of  Independ- 
ence ;  and  finally,  the  experiment  with  the  French  assig- 
nats  carried  out  on  a  still  larger  scale.  Most  of  the 
English  writers  of  that  period  confound  the  circulation 
of  bank-notes,  which  is  governed  by  quite  different  laws, 
with  the  circulation  of  tokens  of  value  or  government 
legal  tender  paper  money;  and  while  they  claim  to 
explain  the  phenomena  of  this  legal  tender  circulation 
by  the  laws  of  metallic  circulation,  they  proceed,  as  a 


—     335     — 

matter  of  fact,  just  the  opposite  way,  viz.,  deduct- 
ing laws  for  the  latter  from  phenomena  observed 
in  connection  with  the  former.  We  omit  all  the 
numerous  writers  of  the  period  of  1800-1809  and 
turn  directly  to  EICARDO,  both  because  he  embodies 
the  views  of  his  predecessors,  which  he  formulates  with 
greater  precision,  and  because  the  shape  he  gave  to  the 
theory  of  money  governs  English  bank  legislation  until 
this  moment.  Ricardo,  like  his  predecessors,  confounds 
the  circulation  of  bank-notes,  or  credit  money,  with  the 
circulation  of  mere  tokens  of  value.  The  fact  which 
impresses  him  most  is  the  depreciation  of  paper  cur- 
rency accompanied  by  the  rise  of  prices  of  commodities. 
What  the  American  mines  had  been  to  Hume,  the  paper- 
bill  presses  in  Threadneedle  street  were  to  Ricardo,  and 
he  himself  expressly  identifies  the  two  factors  at  some 
place  in  his  works.  His  first  writings,  which  dealt  ex- 
clusively with  the  money  question  belong  to  the  time 
of  the  most  violent  controversy  between  the  Bank  of 
England,  which  had  on  its  side  the  ministers  and  the 
war  party,  and  its  opponents  about  whom  were  centered 
the  parliamentary  opposition,  the  Whigs  and  the  Peace 
party.  They  appeared  as  immediate  forerunners  of  the 
famous  Report  of  the  Bullion  Committee  of  1810,  in 
which  Ricardo's  views  were  adopted.*     The  singular 


*  David  Ricardo,  "The  High  Price  of  Bullion,  a  Proof  of  the 
Depreciation  of  Bank-notes."  4th  edition,  London,  1811.  (The 
first  edition  appeared  in  1809) .  Further,  "Reply  to  Mr.  Bosan- 
quet*s  Practical  Observations  on  the  Report  of  the  Bullion  Com- 
mittee."   London,  1811. 


—    S;36    — 

circumstance,  that  Ricardo  and  his  adherents,  who  held 
money  to  be  merely  a  token  of  value,  are  called  bullion- 
ists,  is  due  not  only  to  the  name  of  that  committee,  but 
also  to  the  nature  of  their  theory.  In  his  work  on 
political  economy,  Ricardo  repeated  and  developed  fur- 
ther the  same  views,  but  nowhere  has  he  investigated 
the  nature  of  money  as  such,  as  he  had  done  in  the  case 
of  exchange  value,  profit,  rent,  etc. 

To  begin  with,  Ricardo  determines  the  value  of  gold 
and  silver,  like  that  of  all  other  commodities,  by  the 
quantity  of  labor-time  embodied  in  them.*  By  means  of 
them,  as  commodities  of  a  given  value,  the  values  of  all 
other  commodities  are  measured.'  The  volume  of  the 
circulating  medium  in  a  country  is  determined  by  the 
value  of  the  imit  of  measure  of  money  on  the  one  hand, 
and  by  the  sum  total  of  the  exchange  values  of  commodi- 
ties, on  the  other.  This  quantity  is  modified  by  economy 
in  the  method  of  pajrment.*  Since  the  quantity  of  money, 

*  David  Ricardo :  *'0n  the  Principlea  of  Political  Economy 
etc."  p.  77.  "Their  value  [of  metals]  [like  that  of  all  other 
commodities],  depends  on  the  total  quantity  of  labour  necessary 
to  obtain  the  metal,  and  to  bring  it  to  market.** 

"1.  c  p.  77,  180,  181. 

•Ricardo,  1.  c.  p.  421.  "Tlie  quantity  of  money  that  can  be 
employed  in  a  country  must  depend  on  its  value:  if  gold  alone 
were  employed  for  the  circulation  of  commodities,  a  quantity 
would  be  required,  one  fifteenth  only  of  what  would  be  neces- 
eary,  if  silver  were  made  use  of  for  the  same  purpose.**  See 
also  Ricardo*s:  "Proposals  for  an  Economical  and  Secure  Cur- 
rency," London,  1816,  p.  89,  where  he  says:  "The  amount  of 
notes  in  circulation  depends  on  the  amount  required  for  the 


—    237    — 

of  a  given  value,  which  can  be  absorbed  by  circulation,  is 
thus  determined  and  since  the  value  of  money  within 
the  sphere  of  circulation  manifests  itself  only  in  its 
quantit}^,  it  follows  that  mere  tokens  of  value,  if  issued 
in  proportions  determined  by  the  value  of  money,  may 
replace  it  in  circulation,  and  in  fact,  "a  currency  is  in 
its  most  perfect  state  when  it  consists  wholly  of  paper 
money,  but  of  paper  money  of  an  equal  value  with  the 
gold  which  it  professes  to  repiasent."^  So  far  Ricardo 
determines  the  volume  of  the  circulating  medium  by  the 
prices  of  commodities,  assuming  the  value  of  fnoney 
to  be  given ;  money  as  a  token  of  value  means  with  him 
a  token  of  a  definite  quantity  of  gold  and  not  a  mere 
worthless  representative  of  couimodities  as  was  the  case 
with  Hume. 

When  Ricardo  suddenly  get*  off  the  straight  path  of 
his  presentation  and  takes  the  very  opposite  view,  he 
does  so  to  turn  his  attention  to  the  international  circula- 
tion of  precious  metals  and  thus  brings  confusion  into 
the  problem  by  introducing  considerations  that  are  for- 
eign to  the  subject.  Let  us  follow  his  own  course  of 
reasoning,  and,  in  order  to  remove  everything  that  is 
artificial  and  incidental,  let  us  assume  that  the  gold  and 
silver  mines  are  located  in  the  interior  of  the  countries 
in  which  the  precious  metals  circulate  as  money.  The 
only  inference  which  follows  from  Ricardo's  reasoning 

circulation  of  the  country:  which  is  regulated  ...  by 
the  value  of  the  standard  [of  money],  the  amount  of  payments, 
and  the  economy  practised  in  efTecting  them." 

*  Ricardo,  "Principles  of  Political  Economy",  p.  432. 


—     238     ~ 

as  so  far  developed,  is  that,  the  value  of  gold  being 
given,  the  quantity  of  money  in  circulation  will  be  de- 
termined by  the  prices  of  commodities.  Thus,  at  a 
given  moment,  the  quantity  of  gold  in  circulation  in  a 
country  is  simply  determined  by  the  exchange  value  of 
the  commodities  in  circulation.  Let  us  suppose  now 
that  the  sum  total  of  these  exchange  values  has  declined 
either  because  there  are  less  commodities  produced  at  the 
old  exchange  values,  or  because,  in  consequence  of  an 
increased  productivity  of  labor,  the  same  quantity  of 
commodities  has  a  smaller  value.  Or,  we  may  assume 
on  the  contrary  that  the  sum  total  of  exchange  values 
has  increased,  either  because  the  quantity  of  commod- 
ities has  increased  while  the  cost  of  their  production  has 
remained  the  same,  or  because  the  value  of  the  same 
or  of  a  smaller  quantity  of  commodities  has  risen  in 
consequence  of  a  diminished  productivity  of  labor.  What 
becomes  in  either  case  of  the  given  quantity  of  metal 
in  circulation?  If  gold  is  money  merely  because 
it  is  current  as  a  medium  of  circulation;  if  it  is 
compelled  to  remain  in  circulation  like  government  legal 
tender  paper  money  (and  that  is  what  Eicardo  has  in 
mind),  then  the  quantity  of  money  in  circulation  will 
rise  above  the  normal  level,  as  determined  by  the  ex- 
change value  of  the  metal,  in  the  former  case,  and  fall 
below  that  level  in  the  latter.  Although  possessing  a 
value  of  its  own,  gold  will  become  in  the  former  case  a 
token  of  a  metal  of  lower  exchange  value  than  its 
own,  and  in  the  latter,  a  token  of  a  metal  of 
higher  value.  In  the  former  ease  it  will  remain  as  a 
token  of  value  less  than  its  own,  in  the  latter  greater  than 


—     239     — 

its  own  (again  an  abstract  deduction  from  legal  ten- 
der paper  money).  In  the  former  case  it  is  the  same 
as  though  commodities  were  estimated  in  a  metal  of 
lower  value  than  gold,  in  the  latter,  as  though  they 
were  estimated  in  a  metal  of  higher  value.  In  the  former 
case,  prices  of  commodities  would  rise  therefore,  in  the 
latter  they  would  fall.  In  either  case  the  movement  of 
prices,  their  rise  or  fall,  would  appear  as  the  effect  of  a 
relative  expansion  or  contraction  of  the  volume  of  gold 
in  circulation  above  or  below  the  level  corresponding  to 
its  own  value,  i.  e.  above  or  below  the  normal  quantity 
which  is  determined  by  the  proportion  between  its  own 
value  and  that  of  the  commodities  in  circulation. 

The  same  process  would  take  place  if  the  sum  total 
of  the  prices  of  the  commodities  in  circulation  remained 
unchanged,  while  the  volume  of  gold  in  circulation 
came  to  be  below  or  above  the  right  level:  the  former 
in  case  the  gold  coin  worn  out  in  the  course  of  circula- 
tion were  not  replaced  by  the  production  of  a  corre- 
sponding quantity  of  gold  in  the  mines ;  the  latter,  if  the 
output  of  the  mines  exceeded  the  requirements  of  cir- 
culation. In  either  case  it  is  assumed  that  the  cost 
of  production  of  gold  or  its  value  femain  the  same. 

To  sum  up :  the  money  in  circulation  is  at  its  normal 
level,  when  its  volume  is  determined  by  its  own  bullion 
value,  the  exchange  value  of  commodities  being  given. 
It  rises  above  that  level,  bringing  about  a  fall  in  the 
value  of  gold  below  its  own  bullion  value  and  a  rise  of 
prices  of  commodities,  whenever  the  sum  total  of  the 
exchange  values  of  commodities  declines,  or  the  output 
of  gold  from  the  mines  increases.     It  sinks  below  its 


—     240     — 

right  level,  leading  to  a  rise  of  gold  above  its  owit 
bullion  value  and  to  a  fall  of  prices  of  commodities, 
whenever  the  sum  total  of  the  exchange  values  of  the 
commodities  or  the  gold  output  of  the  mines  is  not  suffi- 
cient to  replace  the  quantity  of  outworn  gold.  In  either 
case  the  gold  in  circulation  becomes  a  token  of  value 
greater  or  smaller  than  that  it  really  possesses.  It  may 
become  an  appreciated  or  depreciated  token  of  itself.  As 
soon  as  all  commodities  would  come  to  be  estimated  in 
gold  of  this  new  value  and  the  general  price  level  would 
accordingly  rise  or  fall,  the  quantity  of  current  gold 
would  again  answer  the  requirements  of  circulation  (a 
consequence  which  Ricardo  emphasizes  with  great  pleas- 
ure), but  would  be  at  variance  with  the  cost  of  produc- 
tion of  the  precious  metals  and,  therefore,  with  their 
relation  as  commodities  to  all  other  commodities.  Ac- 
cording to  the  general  Ricardian  theory  of  exchange 
value,  the  rise  of  gold  above  its  exchange  value,  i.  e.,  above 
the  value  as  determined  by  the  labor-time  contained  in  it, 
would  cause  an  increase  in  the  production  of  gold  until 
the  increased  output  of  it  would  reduce  its  value  to  the 
proper  magnitude.  And  in  the  same  manner,  a  fall  of  gold 
below  its  value  would  cause  a  decline  in  its  production 
until  its  value  rose  again  to  its  proper  magnitude.  By 
these  opposite  movements  the  discrepancy  between  the 
bullion  value  of  gold  and  its  value  as  a  medium  of  cir- 
culation would  disappear,  the  normal  level  of  the  vol- 
ume of  gold  in  circulation  would  be  restored,  and  the 
price  level  would  again  correspond  to  the  measure  of 
value.  These  fluctuations  in  the  value  of  gold  in  circula- 
tion would  to  the  same  extent  affect  gold  ir  the  form  of 


—     241     — 

bullion,  because  by  assumption,  all  gold  that  is  not  util- 
ized as  an  article  of  luxury,  is  supposed  to  be  in  circula- 
tion. Since  gold  itself  may  become,  both  as  coin  and  bul- 
lion, a  token  of  value  of  greater  or  smaller  magnitude 
than  its  bullion  value,  it  is  self  understood  that  convert- 
ible bank-notes  in  circulation  have  to  share  the  same  fate. 
Although  bank-notes  are  convertible,  i.  e.  their  real  valm 
and  nominal  value  agree,  "the  aggregate  currency  con- 
sisting of  metal  and  of  convertible  notes"  may  appre- 
ciate or  depreciate  according  as  to  whether  it  rises  oi 
falls,  for  reasons  already  stated,  above  or  below  the  level 
determined  by  the  exchange  value  of  the  commodities  in 
circulation  and  the  bullion  value  of  gold.  Inconvertib  9 
paper  money,  has,  from  this  point  of  view,  only  that 
advantage  as  against  convertible  paper  money,  that  it 
may  depreciate  in  a  two-fold  manner.  It  may  fall  be- 
low the  value  of  the  metal  which  it  is  supposed  to  repre- 
sent, because  it  has  been  issued  in  too  great  quantity, 
or  it  may  depreciate  because  the  metal  it  represents  has 
itself  fallen  in  value.  This  depreciation,  not  of  paper 
as  compared  with  gold,  but  of  gold  and  paper  together, 
or  of  the  aggregate  currency  of  a  country,  is  one  of  the 
principal  discoveries  of  Ricardo,  which  Lord  Overstone 
and  Co.  pressed  into  their  service  and  made  a  funda- 
mental principle  of  Sir  Robert  Peelers  Bank  legislation 
of  1844  and  1845. 

What  should  have  been  proven  was  that  the  price  of 

commodities   or   the    value    of   gold    depends    on    the 

^y    quantity  of  gold  in  circulation.  V^  The  proof  consists  in 

the  assumption  of  what  is  to  be  proven,  viz.  that  any 

quantity   of  the   precious   metal   employed   as   money 


—     242     — 

must  become  a  medium  of  circulation  or  coin,  and  there- 
by a  token  of  value  for  the  commodities  in  circulation, 
no  matter  in  what  proportion  to  its  own  intrinsic  value 
and  no  matter  what  the  total  value  of  those  commodities 
may  be.  V  To  put  it  differently,  the  proof  consists  in 
overlooking  all  the  other  functions  which  money  per- 
forms besides  its  function  of  a  medium  of  circulation. 
When  hard  pressed,  as  in  his  controversy  with  Bosan- 
quet,  Eicardo,  completely  under  the  influence  of  the 
phenomenon  of  depreciated  tokens  of  value  caused  by 
their  quality,  takes  recourse  to  dogmatic  assurances.^ 

If  Kicardo  had  built  up  this  theory  by  abstract  reason- 
ing, as  we  have  done  it  here,  without  introducing  con- 
crete facts  and  incidental  matters  which  only  distract 
his  attention  from  the  main  question,  its  hollowness 
would  be  striking.  But  he  takes  up  the  entire  subject 
in  its  international  aspect.  It  will  be  easy  to  prove, 
however,  that  the  apparent  magnitude  of  scale  does  not 
make  his  fundamental  ideas  less  diminutive. 

His  first  proposition  was  as  follows:  the  volume  of 
metallic  currency  is  normal  when  it  is  determined  by 
the  total  value  of  the  commodities  in  circulation  esti- 
mated in  its  bullion  value.  Expressed  so  as  to  apply 
to  international  conditions,  it  reads  thus:  in  a  normal 
state  of  circulation  every  country  possesses  a  quantity 
of  money  "according  to  the  state  of  its  commerce  and 


'  David  Ricardo,  "Reply  to  Mr.  Bosanquet*s  Practical  Obser- 
vations, etc."  p.  40.  "That  commodities  would  rise  or  fall  in 
price,  in  proportion  to  the  increase  or  diminution  of  money,  / 
assume  as  a  fact  which  is  incontrovertible." 


243 


wealth/'  Money  circulates  at  a  value  corresponding 
to  its  real  value  or  to  its  cost  of  production,  i.  e.  it  has 
the  same  value  in  all  countries.^  That  being  the  case, 
"there  could  be  no  temptation  offered  to  either  for  their 
importation  or  exportation."-  There  would  thus  be 
established  a  balance  of  currencies  between  the  different 
countries.  The  normal  level  of  a  national  currency  is 
now  expressed  in  terms  of  an  international  balance  of 
currencies,  which  practically  amounts  to  the  statement 
that  nationality  does  not  change  anything  in  a  universal 
economic  law.  We  have  reached  again  the  same  fatal 
point  as  before.  How  is  the  normal  level  disturbed? 
Or,  speaking  in  terms  of  the  new  terminology,  how  is 
the  international  balance  of  currencies  disturbed?  Or, 
how  does  money  cease  to  have  the  same  value  in  all 
countries?  Or,  finally,  how  does  it  cease  to  pass  at  its 
own  value  in  every  country?  We  have  seen  that  the 
normal  level  was  disturbed  by  an  increase  or  decrease 
of  the  volume  of  money  in  circulation  while  the  total 
value  of  commodities  remained  the  same;  or,  because 
the  quantity  of  money  in  circulation  remained  the  same 
while  the  exchange  values  of  commodities  rose  or  fell. 
In  the  same  manner,  the  international  level,  determined 
by  the  value  of  the  metal  itself,  is  disturbed  by  an  in- 
crease in  the  quantity  of  gold  in  a  country  brought 


*  David  Ricardo,  "The  High  Price  of  Bullion,"  etc.  '^Money 
would  have  the  same  value  in  all  countriee."  p.  4.  In  his 
Political  Economy  Ricardo  modified  this  statement,  but  not  in 
a  way  to  affect  what  has  been  said  here. 

'  1.  c.  p.  3-4. 


—     244     — 

about  by  the  discovery  of  new  gold  mines/  or  by  an  in- 
crease or  decrease  of  the  total  exchange-value  of  the 
circulating  commodities  in  any  particular  country.  Just 
as  in  the  former  case  the  output  of  the  precious  metals 
decreased  or  increased  according  as  to  whether  it  was 
necessary  to  contract  or  expand  the  currency  and  thereby 
to  lower  or  raise  prices,  so  are  the  same  effects  produced 
now  by  export  and  import  from  one  country  to  another. 
In  the  country  in  which  prices  would  rise  or  the  value 
of  gold  would  fall  below  the  bullion  value  in  conse- 
quence of  a  redundant  currency,  gold  would  be  de- 
preciated, and  the  prices  of  commodities  would  rise  as 
compared  with  other  countries.  Gold  would,  therefore, 
be  exported,  while  commodities  would  be  imported,  and 
vice  versa.  Just  as  in  the  former  case  the  output  of 
gold,  80  now  the  import  or  export  of  gold  and,  with  it, 
the  rise  or  fall  of  prices  of  commodities  would  continue 
until,  as  we  would  have  said  before,  the  right  value 
relation  would  be  restored  between  the  metal  and  com- 
modities, or  as  we  shall  say  now,  the  international 
balance  of  currencies  would  be  restored.  Just  as  in  tlie 
former  case  the  production  of  gold  increased  or  de- 
creased because  gold  stood  above  or  below  its  value, 
so  now  the  international  migration  of  gold  would  take 
place  for  the  same  reason.  Just  as  in  the  former  case, 
every  change  in  the  production  of  the  circulating  metal 
affected  its  quantity  and,  thereby,  prices,  so  would  the 
same  effect  be  produced  now  by  international  import 
and  export.     As  soon  as  the  relative  values  of  gold  and 

M.  c,  p.  4. 


245 


commodities  or  the  normal  quantity  of  cnrrency  would 
be  restored,  no  further  production  would  take  place  in 
the  former  case,  and  no  further  export  or  import  in  the 
latter,  except  in  so  far  as  would  be  necessary  to  replace 
outworn  coin  and  to  meet  the  demand  of  manufacturers 
of  articles  of  luxury.  It  follows  '*that  the  temptation  to 
export  money  in  exchange  for  goods,  or  what  is  termed 
an  unfavorable  balance  of  trade,  never  arises  but  from  a 
redundant  currency." '  "The  exportation  of  the  coin 
is  caused  by  its  cheapness,  and  is  not  the  effect,  but  the 
cause  of  an  unfavourable  balance."  ^  Since  the  increase 
or  decrease  in  the  production  of  gold  in  the  former  case 
and  the  importation  or  exportation  of  gold  in  the  latter, 
take  place  only  whenever  its  volume  rises  above  or  sinks 
below  its  normal  level,  i.  e.  whenever  gold  appreciates 
or  depreciates  in  comparison  with  its  bullion  value,  or 
whenever  prices  of  commodities  are  too  high  or  too  low ; 
it  follows  that  every  such  movement  works  as  a  correc- 
tive,^ since,  through  the  resultant  expansion  or  contrac- 
tion of  the  currency,  prices  are  restored  to  their  true 
level :  in  the  former  case  this  level  represents  the  bahmce 
between  the  respective  values  of  gold  and  of  commodi- 
ties ;  in  the  latter,  the  international  balance  of  currencies. 
To  put  it  in  other  words :  money  circulates  in  different 
countries  only  in  so  far  as  it  circulates  as  coin  in  every 
country.  Money  is  but  coin  and  all  the  gold  existing  in 
a  country  must  therefore  enter  circulation,  i.  e.  it  can 

^Ricardo,  1.  c,  p.  11-12. 
'Rieardo,  1.  c.  p.  14. 
M.  c,  p.   17. 


—     246     — 

rise  above  or  fall  below  its  value  as  a  token  of  value. 
Thus  we  safely  land  again,  by  the  round-about  way  of 
this  international  complication,  at  the  simple  dogma 
which  constituted  our  starting  point. 

With  what  violence  to  actual  facts  Ricardo  has  to  ex- 
plain them  in  the  sense  of  his  abstract  theory,  a  few 
illustrations  will  suiBfice  to  show.  He  maintains,  e.  g. 
that  in  years  of  poor  crops,  which  happened  frequently 
in  England  during  1800-1820,  gold  is  exported  not 
because  com  is  needed  and  gold  as  money  is  at  all  times 
an  effectual  means  of  purchase  in  the  world  market,  but 
because  gold  is  in  such  cases  depreciated  in  its  value  as 
compared  with  other  commodities  and,  therefore,  the 
currency  of  the  country  in  which  there  has  been  a  failure 
of  crops  is  depreciated  with  respect  to  other  national 
currencies.  "In  consequence  of  a  bad  harvest,  a  country 
having  been  deprived  of  a  part  of  its  commodities  .  .  . 
the  currency  which  was  before  at  its  just  level  .  .  . 
become  (s)  redundant,"  and  prices  of  all  commodities 
rise  in  consequence.'    Contrary  to  this  paradoxical  in- 


*  Ricardo,  1.  c,  p.  74-75.  "England,  in  consequence  of  a  bad 
harvest,  would  come  under  the  case  of  a  country  having  been 
deprived  of  a  part  of  its  commodities,  and,  therefore,  requiring 
a  diminished  amoimt  of  circulating  medium.  The  currency 
which  was  before  equal  to  her  payments  would  now  become 
Buper-abundant  and  relatively  cheap,  in  proportion.  .  .  of 
her  diminished  production ;  the  exportation  of  this  sum,  there- 
fore, would  restore  the  value  of  her  currency  to  the  value  of  the 
currencies  of  other  countries."  His  confusion  of  money  and 
commodity,  and  of  money  and  coin  borders  on  the  ludicrous  in 
the  following  passage:     "If  we  can  suppose  that  after  an  im- 


—     247     — 

terpretation  it  has  been  proven  statistically  that  from 
1793  to  the  present  time,  whenever  England  had  a  bad 
harvest  the  available  supply  of  cuj-rency  not  only  did 
not  become  superabundant,  but  became  inadequate  and 
that,  therefore,  more  money  circulated  and  had  to  cir- 
culate on  such  occasions.^ 

In  the  same  manner,  Ricardo  maintained,  with  refer- 
ence to  Napoleon's  ContiQental  System  and  the  English 
Blockade  Decree,  that  the  English  exported  gold  instead 
of  commodities  to  the  Continent,  because  their  money 
was  depreciated  with  respect  to  the  money  on  the  Con- 
tinent, that  their  commodities  were,  therefore,  more 
high  priced,  which  made  it  a  more  profitable  commercial 
speculation  to  export  gold  than  goods.  According  to 
him  England  was  a  market  in  which  commodities  were 
dear  and  money  was  cheap,  while  on  the  Continent 

favorable  harvest,  when  England  has  occasion  for  an  unusual 
importation  of  com,  another  nation  is  possessed  of  a  super- 
abundance of  that  article,  but  has  no  wants  for  any  commodity 
whatever,  it  would  unquestionably  follow  that  such  nation 
would  not  export  its  corn  in  exchange  for  commodities:  but 
neither  toould  it  export  com  for  money ^  as  that  is  a  commodity 
which  no  nation  ever  wants  absolutely,  but  relatively."  1.  c, 
p.  75.  Pushkin  in  his  hero  poem  makes  the  father  of  his  hero 
incapable  of  comprehending  that  commodities  are  money.  But 
that  money  is  a  commodity,  the  Russians  have  understood  from 
times  of  yore  as  is  proven  not  only  by  the  English  com  import* 
in  1838-1842,  but  by  the  entire  history  of  their  commerce. 

^  Conf.  Thomas  Tooke,  "History  of  Prices,"  and  James  Wil- 
son, "Capital,  Currency  and  Banking."  (The  latter  work  is  a 
reprint  of  a  series  of  articles  which  appeared  in  the  London 
Economist  in  1844,  1845  and  1847.) 


—    248    — 

commodities  were  cheap  and  money  was  dear.  The  trou- 
ble, according  to  an  English  writer,  was  "the  ruinously 
low  prices  of  our  manufactures  and  of  our  colonial 
productions  under  the  operation  ...  of  the  'Con- 
tinental System'  during  the  last  six  years  of  the  war, 
.  .  .  The  prices  of  sugar  and  coffee,  for  instance,  on 
the  Continent,  computed  in  gold,  were  four  or  five  times 
higher  than  their  prices  in  England,  computed  in  bank- 
notes. I  am  speaking  ...  of  the  times  in  which 
the  French  chemists  discovered  sugar  in  beet-root,  and 
a  substitute  for  coffee  in  chicory;  and  when  the  Eng- 
lish grazier  tried  experiments  upon  fattening  oxen  with 
treacle  and  molasses — of  the  times  when  we  took  pos- 
session of  the  island  of  Heligoland,  in  order  to  fonn 
there  a  depot  of  goods  to  facilitate,  if  possible,  the 
smuggling  of  them  into  the  north  of  Europe ;  and  when 
the  lighter  descriptions  of  British  manufactures  found 
their  way  into  Germany  through  Turkey.  .  .  .  Al- 
most all  the  merchandise  of  the  world  accumulated  in 
our  warehouses,  where  they  became  impounded,  except 
when  some  small  quantity  was  released  by  a  French 
License,  for  which  the  merchants  at  Hamburgh  and 
Amsterdam  had,  perhaps,  given  Napoleon  such  a  sum 
as  forty  or  fifty  thousand  pounds.  They  must  have  been 
strange  merchants  ...  to  have  paid  so  large  a  sum 
for  liberty  to  carry  a  cargo  of  goods  from  a  dear  market 
to  a  cheap  one.  What  was  the  ostensible  alternative  the 
merchant  had?  .  .  .  Either  to  buy  coffee  at  6d. 
a  poimd  in  bank-notes,  and  send  it  to  a  place  where  it 
would  instantly  sell  at  3s.  or  4s.  a  pound  in  gold,  or  to 
buy  gold  with  bank-notes  at  £5  an  oimce,  and  send  it 


249 


to  a  place  where  it  would  be  received  at  £3  178.  lO^d. 
an  ounce:  .  .  .  It  is  too  absurd,  of  course,  to  say 
.  .  .  that  the  gold  was  remitted  instead  of  the  cof- 
fee, as  a  preferable  mercantile  operation.  .  .  . 
There  was  not  a  country  in  the  Wt*.^  !;:>  ^hich  so 
large  a  quantity  of  desirable  goods  could  be  obtained,  m 
return  for  an  ounce  of  geld,  as  in  England.  .  .  . 
Bonaparte  .  .  .  was  constantly  examining  the 
English  Price  Current.  ...  So  long  as  he  saw  that 
gold  was  dear  and  coffee  was  cheap  in  England,  he  was 
satisfied  that  his  'Continental  System'  worked  well."^ 

At  the  very  time  when  Ricardo  first  formulated  his 
theory  of  money,  and  the  Bullion  Committee  embodied 
it  in  its  parliamentary  repon,  namely  in  1810,  a  ruin- 
ous fall  of  prices  of  all  English  commodities  as  com- 
pared with  those  of  1808  hnd  1809  took  place,  while 
gold  rose  in  value  accordingly.  Only  agricultural  prod- 
ucts formed  an  exception,  because  their  importa- 
tion from  abroad  met  with  obstacles  and  their  domestic 
supply  was  decimated  by  unfavorable  crop  conditions.  = 
Ricardo  so  utterly  failed  to  comprehend  the  role  of 
precious  metals  as  an  international  means  of  pajrment, 
that  in  his  testimony  before  the  Committee  of  the  House 
of  Lords  in  1819  he  could  say  "that  drains  for  exporta- 
tion would  cease  altogether  so  soon  as  cash  payments 

*  James  Deacon  Hume :  "Letters  on  the  Com  Laws."  Lon- 
don, 1834,  p.  29-31.  [Letter  by  H.  B.  T.  on  the  Corn  Laws  and 
on  the  Kights  of  the  Working  Classes.    Transl.] 

'Thomas  Tooke,  '^History  of  Prices,"  etc.  London,  1848, 
p.  110. 


250 


should  be  resumed,  and  the  currency  be  restored  to  its 
metallic  level."  He  died  just  in  time,  on  the  very  eve 
of  the  crisis  of  1825,  which  belied  his  prophesies. 

The  time  when  Kicardo  wrote  was  generally  little 
adapted  for  the  observation  of  the  function  of  precious 
metals  as  world  money.  Before  the  introduction  of  the 
Continental  System,  the  balance  of  trade  had  almost 
always  been  in  favor  of  England,  and  while  that  system 
lasted,  the  commercial  intercourse  with  the  European 
continent  was  too  insignificant  to  affect  the  English 
rate  of  exchange.  The  money  transmissions  were  mostly 
of  a  political  nature  and  Eicardo  seems  to  have  utterly 
failed  to  grasp  the  part  which  subsidy  payments  played 
at  that  time  in  English  gold  exports.^ 

Among  the  contemporaries  of  Kicardo  who  formed 
the  school  which  adopted  his  economic  principles, 
JAMES  MILL  was  the  most  important  one.  He  at- 
tempted to  work  out  Ricardo's  theory  of  money  on  the 
basis  of  simple  metallic  circulation,  without  the  irrele- 
vant international  complications  which  served  Kicardo 
to  hide  the  inadequacy  of  his  theory,  and  without  any 
controversial  regard  for  the  operations  of  the  Bank  of 
England.     His  main  arguments  are  as  follows: 

"By  value  of  money,  is  here  to  be  understood  the 
proportion  in  which  it  exchanges  for  other  commodities, 
or  the  quantity  of  it  which  exchanges  for  a  certain 
quantity  of  other  things.  .  .  .  It  is  the  total  quan- 
tity of  the  money  in  any  country,  which  determines 
what  portion  of  that  quantity  shall  exchange  for  a  cer- 

*  Conf.  W.  Blake's  above  quoted  "Observations  etc." 


—    251     — 

tain  portion  of  the  goods  or  commodities  of  that  country. 
If  we  suppose  that  all  the  goods  of  the  country  are  on 
one  side,  all  the  money  on  the  other,  and  that  they  are 
exchanged  at  once  against  one  another,  it  is  evident 
.  .  .  that  the  value  of  money  would  depend  wholly 
upon  the  quantity  of  it.  It  will  appear  that  the  case 
is  precisely  the  same  in  the  actual  state  of  the  facts. 
The  whole  of  the  goods  of  a  country  are  not  exchanged 
at  once  against  the  whole  of  the  money;  the  goods  are 
exchanged  in  portions,  often  in  very  small  portions, 
and  at  different  times,  during  the  course  of  the  whole 
year.  The  same  piece  of  money  which  is  paid  in  one 
exchange  to-day,  may  be  paid  in  another  exchange  to- 
morrow. Some  of  the  pieces  will  be  employed  in  a 
great  many  exchanges,  some  in  very  few,  and  some, 
which  happen  to  be  hoarded,  in  none  at  all.  There 
will,  amid  all  these  varieties,  be  a  certain  average  num- 
ber of  exchanges,  the  same  which,  if  all  the  pieces  had 
performed  an  equal  number,  would  have  been  performed 
by  each ;  that  average  we  may  suppose  to  be  any  number 
we  please ;  say,  for  example,  ten.  If  each  of  the  pieces 
of  the  money  in  the  coimtry  perform  ten  purchases, 
that  is  exactly  the  same  thing  as  if  all  the  pieces  were 
multiplied  by  ten,  and  performed  only  one  purchase 
each.  The  value  of  all  the  goods  in  the  country  is  equal 
to  ten  times  the  value  of  all  the  money.  ...  If 
the  quantity  of  money  instead  of  performing  ten  ex- 
changes in  the  year,  were  ten  times  as  great,  and  per- 
formed only  one  exchange  in  the  year,  it  is  evident  that 
whatever  addition  were  made  to  the  whole  quantity, 
would  produce  a  proportional  diminution  of  value,  in 


—     252    — 

each  of  the  minor  quantities  taken  separately.  As  the 
quantity  of  gooas,  against  which  the  money  is  ail  ex- 
changed at  once,  is  supposed  to  be  the  same,  the  value 
of  all  the  money  is  no  more,  after  the  quantity  is  aug- 
mented, than  before  it  was  augmented.  If  it  is  supposed 
to  be  augmented  one-tenth,  the  value  of  every  part,  that 
of  an  ounce  for  example,  must  be  diminished  one-tenth. 
.  .  .  In  whatever  degree,  therefore,  the  quantity  of 
money  is  increased  or  diminished,  other  things  remain- 
ing the  same,  in  that  same  proportion,  the  value  of 
the  whole,  and  of  every  part,  is  reciprocally  diminished 
or  increased.  This,  it  is  evident,  is  a  proposition  uni- 
versally true.  Whenever  the  value  of  money  has  either 
risen  or  fallen  (the  quantity  of  goods  against  which  it 
is  exchanged  and  the  rapidity  of  circulation  remaining 
the  same),  the  change  must  be  owing  to  a  corresponding 
diminution  or  increase  of  the  quantity ;  and  can  be  owing 
tx)  nothing  else.  If  the  quantity  of  goods  diminish,  while 
the  quantity  of  money  remains  the  same,  it  is  the  same 
thing  as  if  the  quantity  of  money  had  been  increased ;" 
and  vice  versa.  .  .  .  "Similar  changes  are  produced 
by  any  alteration  in  the  rapidity  of  circulation.  .  .  . 
An  increase  in  the  number  of  these  purchases  has  the 
same  effect  as  an  increase  in  the  quantity  of  money; 
a  diminution  the  reverse.  ...  If  there  is  any  por- 
tion of  the  annual  produce  which  is  not  exchanged  at  all, 
as  what  is  consumed  by  the  producer;  or  which  it  not 
exchanged  for  money ;  that  is  not  taken  into  the  account, 
because  what  is  not  exchanged  for  money  is  in  the 
same  state  with  respect  to  the  money,  as  if  it  did  not 
exist.    .    .     .    Wlienever  the  coining  of  money   •    .    » 


—     253    — 

is  free,  its  quantity  is  regulated  by  the  value  of  the 
metal.  .  .  .  Gold  and  silver  are  in  reality  com- 
modities .  .  .  It  is  cost  of  production  .  .  . 
which  determines  the  value  of  these,  as  of  other  ordi- 
nary productions."  * 

The  whole  wisdom  of  Mill  resolves  itself  into  a  series 
of  arbitrary  and  absurd  assumptions.  He  wishes  to 
prove  that  the  price  of  commodities  or  the  value  of 
money  is  determined  by  "the  total  quantity  of  the  money 
in  any  country."  Assuming  that  the  quantity,  and  the 
exchange  value  of  the  commodities  in  circulation  remain 
unchanged  and  that  the  same  be  true  of  the  rapidity  of 
circulation  and  of  the  value  of  precious  metals  as  deter- 
mined by  the  cost  of  production,  and  assuming  at  the 
same  time  that  the  quantity  of  the  metallic  currency 
increases  or  decreases  in  proportion  to  the  quantity  of 
money  existing  in  a  country,  it  becomes  really  "evident" 
that  what  was  to  have  been  proven  has  been  assumed. 
Mill  falls,  moreover,  into  the  same  error  as  Hume  by 
assuming  that  use-values  and  not  commodities  with  a 
given  exchange  value  are  in  circulation,  and  that 
vitiates  his  statement,  even  if  we  grant  all  of  his  "as- 
sumptions." The  rapidity  of  circulation  may  remain  the 
same ;  this  may  also  be  true  of  the  value  of  the  precious 
metals  and  of  the  quantity  of  commodities  in  circulation ; 
and  yet  a  change  in  the  exchange  value  of  the  latter 
may  require  now  a  larger  and  now  a  smaller  quantity 
of  money  for  their  circulation.    Mill  sees  that  a  part  of 

*  James  Mill :  "Elements  of  Political  Economy."  [Iiondon, 
1821,  p.  95-101  passim.   TransL] 


—    254    — 

the  money  in  a  country  is  in  circulation,  while  another  is 
idle.  With  the  aid  of  a  most  absurd  average  calculation 
he  assumes  that,  although  it  really  appears  to  be  differ- 
ent, yet  all  the  gold  in  a  country  does  circulate.  As- 
suming that  ten  million  silver  thalers  circulate  in 
a  country  twice  a  year,  there  could  be  twenty 
million  such  coins  in  circulation,  if  each  circulated  but 
once.  And  if  the  entire  quantity  of  silver  to  be  found 
in  a  country  in  any  form  amounts  to  one  hundred  mil- 
lion thalers,  it  may  be  supposed  that  the  entire  one 
hundred  million  can  enter  circulation,  if  each  piece  of 
money  should  circulate  once  in  five  years.  One  could 
as  well  assume  that  all  the  money  of  the  world  circulate 
in  Hempstead,  but  that  each  piece  of  money  instead  of 
being  employed  three  times  a  year,  is  employed  once  in 
3,000,000  years.  The  one  assumption  is  as  relevant  as 
the  other  for  the  purpose  of  determining  the  relation 
between  the  sum  total  of  prices  of  commodities  and  the 
volume  of  currency.  Mill  feels  that  it  is  a  matter  of 
decisive  importance  to  him  to  bring  the  commodities 
in  direct  contact  not  with  the  money  in  circulation,  but 
with  the  entire  supply  of  money  existing  in  a  country. 
He  admits  that  "the  whole  of  the  goods  of  a  country  are 
not  exchanged  at  once  against  the  whole  of  the  money," 
but  that  the  goods  are  exchanged  in  different  portions 
and  at  different  times  of  the  year  for  different  portions 
of  money.  To  do  away  with  this  difficulty  he  assumes 
that  it  does  not  exist.  Moreover,  this  entire  idea 
of  direct  contact  of  commodities  and  money  and  direct 
exchange  is  a  mere  abstraction  from  the  movement  of 
simple  purchase  and  sale  or  the  function  of  money  as  a 


—    255     — 

means  of  purchase.  Already  in  the  movement  of  money 
as  a  means  of  payment,  commodity  and  money  ceaae  to 
appear  simultaneously. 

The  commercial  crises  of  the  nineteenth  century, 
namely,  the  great  crises  of  1825  and  1836,  did  not  re- 
sult in  any  new  developments  in  the  Ricardian  theory  of 
money,  but  they  did  furnish  new  applications  for  it. 
They  were  no  longer  isolated  economic  phenomena,  such 
as  the  depreciation  of  the  precious  metals  in  the  six- 
teenth and  seventeenth  centuries  which  interested 
Hume,  or  the  depreciation  of  paper  money  in 
the  eighteenth  and  early  nineteenth  centuries  which 
confronted  Ricardo;  they  were  the  great  storms 
of  the  world  market  in  which  the  conflict  of  all 
the  elements  of  the  capitalist  process  of  pro- 
duction discharge  themselves,  and  whose  origin  and 
remedy  were  sought  in  the  most  superficial  and  abstract 
sphere  of  this  process,  the  sphere  of  money  circulation. 
The  theoretical  assumption  from  which  the  school  of 
economic  weather  prophets  proceeds,  comes  down  in 
the  end  to  the  illusion  that  Ricardo  discovered  the  laws 
governing  the  circulation  of  purely  metallic  currency. 
The  only  thing  that  remained  for  them  to  do  was  to  sub- 
ject to  the  same  laws  the  circulation  of  credit  and  bank- 
note currency. 

The  most  general  and  most  palpable  phenomenon  in 
commercial  crises  is  the  ^dden,  general  decline  of  prices 
following  a  prolonged  general  rise.  The  general  decline 
of  prices  of  commodities  may  be  expressed  as  a  rise  in 
the  relative  value  of  money  with  respect  to  all  commodi- 
ties, and  the  general  rise  of  prices  as  a  decline  of  the 


—     256     — 

relative  value  of  money.  In  either  expression  the  phe- 
nomenon is  described  but  not  explained.  Whether  I 
put  the  question  thus :  explain  the  general  periodic  rise 
of  prices  followed  by  a  general  decline  of  the  same,  or 
formulate  the  same  problem  by  saying:  explain  the 
periodic  decline  and  rise  of  the  relative  value  of  money 
with  respect  to  commodities ;  the  different  wording  leaves 
the  problem  as  little  changed  as  would  its  translation 
from  German  into  English.  Eicardo's  theory  of  money 
was  exceedingly  convenient,  because  it  lends  a  tautology 
the  semblance  of  a  statement  of  causal  connection. 
Whence  comes  the  periodic  general  fall  of  prices  ?  From 
the  periodic  rise  of  the  relative  value  of  money. 
Whence  the  general  periodic  rise  of  prices?  From  the 
periodic  decline  of  the  relative  value  of  money.  It 
might  have  been  stated  with  equal  truth  that  the  peri- 
odic rise  and  fall  of  prices  is  due  to  their  periodic  rise 
and  fall.  The  problem  itself  is  stated  under  the  as- 
sumption that  the  intrinsic  value  of  money,  i.  e.,  its 
value  as  determined  by  the  cost  of  production  of  precious 
metals  remains  unchanged.  If  it  is  more  than  a  tau- 
tology then  it  is  based  on  a  misconception  of  the  most 
elementary  principles.  If  the  exchange  value  of  A 
measured  in  terms  of  B,  declines,  we  know  that  this 
may  be  caused  by  a  decline  of  the  value  of  A  as  much 
as  by  a  rise  of  the  value  of  B ;  the  same  being  true  of 
the  case  of  a  rise  of  the  exchange  value  of  A  measured 
in  terms  of  B.  The  tautology  once  admitted  as  a  state- 
ment of  cause,  the  rest  follows  easily.  A  rise  of  prices 
of  commodities  is  caused  by  a  decline  of  the  value  of 
money  and  a  decline  of  the  value  of  money  is  caused. 


—     257     — 

as  we  know  from  Ricardo,  by  a  redundant  currency, 
i.  e.,  by  a  rise  of  the  volume  of  currency  over  the  level 
determined  by  its  own  intrinsic  value  and  the  intrinsic 
value  of  the  commodities.  In  the  same  manner,  the  gen- 
eral decline  of  prices  of  commodities  is  explained  by  the 
rise  of  the  value  of  money  above  its  intrinsic  value  in 
consequence  of  an  inadequate  currency.  Thus,  prices 
rise  and  fall  periodically,  because  there  is  periodically 
too  much  or  too  little  money  in  circulation.  Should 
a  rise  of  prices  happen  to  coincide  with  a  contracted  cur- 
rency, and  a  fall  of  prices  with  an  expanded  one,  it  may 
be  asserted  in  spite  of  those  facts  that  in  consequence 
of  a  contraction  or  expansion  of  the  volume  of  commod- 
ities in  the  market,  which  can  not  be  proven  statistically, 
the  quantity  of  money  in  circulation  has,  although  not 
absolutely,  yet  relatively  increased  or  declined.  We  have 
seen  that  according  to  Ricardo  these  universal  fluctua- 
tions must  take  place  even  with  a  purely  metallic  cur- 
rency, but  that  they  balance  each  other  through  their 
alternations;  thus,  e.  g.,  an  inadequate  currency  causes 
a  fall  of  prices,  the  fall  of  prices  leads  to  the  export  of 
commodities  abroad,  this  export  causes  again  an  import 
of  gold  from  abroad,  which,  in  its  turn,  brings  about  a 
rise  of  prices;  the  opposite  movement  taking  place  in 
case  of  a  redundant  currency,  when  commodities  are  im- 
ported and  money  is  exported.  But,  since  in  spite  of 
these  universal  fluctuations  of  prices  which  are  in  per- 
fect accord  with  Ricardo's  theory  of  metallic  currency, 
their  acute  and  violent  form,  their  crisis-form,  belongs 
to  the  period  of  advanced  credit,  it  is  perfectly  clear 
that  the  issue  of  bank-notes  is  not  exactly  regulated  by 


—    258    — 

the  laws  of  metallic  currency.  Metallic  currency  has 
its  remedy  in  the  import  and  export  of  precious  metals 
which  immediately  enter  circulation  and  thus,  by  their 
influx  or  efBux,  cause  the  prices  of  commodities  to  fall 
or  rise.  The  same  effect  on  prices  must  now  be  exerted 
by  banks  by  the  artificial  imitation  of  the  laws  of  me- 
tallic currency.  If  gold  is  coming  in  from  abroad  it 
proves  that  the  currency  is  inadequate,  that  the  value 
of  money  is  too  high  and  the  prices  of  conmiodities  too 
low,  and,  consequently,  that  bank  notes  must  be  put  in 
circulation  in  proportion  to  the  newly  imported  gold. 
On  the  contrary,  notes  have  to  be  withdrawn  from  cir- 
culation in  proportion  to  the  export  of  gold  frcm  the 
country.  That  is  to  say,  the  issue  of  bank  notes  must 
be  regulated  by  the  import  and  export  of  the  precious 
metals  or  by  the  rate  of  exchange.V  Ricardo's  false  as- 
cuT^iption  that  gold  is  only  coin,  and  that  therefore  all 
iiaported  gold  swells  the  currency,  causing  price?  to  ri?e, 
while  a^l  exported  gold  reduces  the  currency  loading  to 
a  fall  oC  prices,  this  theoretical  assumption  is  turned 
into  a  practical  experiment  of  putting  in  every  ca?e  an 
amount  of  currency  in  circulation  equal  to  the  amoimt 
of  goV^  in  existence.  Lord  Overstone  ( Jie  banker  Jones 
Loyd),  Colonel  Torrens,  Norman,  Clay,  Arbuthnot  ani 
a  h'^pt  of  other  writers,  known  in  England  as  the  ad- 
hercius  of  the  "currency  principle,"  not  only  preached 
this  drctiine,  but  with  the  aid  of  Sir  Robert  Peel  suc- 
ceeded in  1844  and  1845  in  making  it  the  basis  of  the 
present  English  and  Scotch  bank  legislation.  Its  ig- 
nominous  failure,  theoretical  as  well  as  practical,  fol- 
lowing upon  experiments  on  the  larges-t  national  scale, 


—     259     — 

can  be  treated  only  after  we  take  up  the  theory  of  credit* 
So  much  can  be  seen,  however,  that  the  theory  of  Ricardo 
which  isolates  money  in  its  fluent  form  of  currency,  ends 
by  ascribing  to  the  ebbs  and  tides  in  the  supply  of 
precious  metals  an  influence  on  bourgeois  economy  such 
as  the  believers  in  the  superstitions  of  the  monetary  sys- 
tem had  never  dreamt  of.  Thus  did  Ricardo,  who  pro- 
claimed paper  currency  as  the  most  perfect  fonn  of 
money,  become  the  prophet  of  the  bullionists. 
After  Hume's  theory  or  the  abstract  opposition  to  the 


*A  few  months  before  the  outbreak  of  the  commercial  crisis 
of  1857«  a  committee  of  the  House  of  Commons  was  in  session 
to  inquire  into  the  effect  of  the  bank-laws  of  1844  and  1845. 
Lord  Overstone,  the  theoretical  father  of  these  laws,  delivered 
himself  of  this  boast  in  his  testimony  before  the  committee: 
"By  strict  and  prompt  adherence  to  the  principles  of  the  act  of 
1844,  everything  has  passed  off  with  regularity  and  ease;  the 
monetary  system  is  safe  and  unshaken,  the  prosperity  of  the 
country  is  undisputed,  the  public  confidence  in  the  wisdom  of 
the  act  of  1844  is  daily  gaining  strength ;  and  if  the  committee 
wish  for  further  practical  illustration  of  the  soundness  of  the 
principles  on  which  it  rests,  or  of  the  beneficial  results  which  it 
has  assured,  the  true  and  sufficient  answer  to  the  committee  is, 
look  around  you ;  look  at  the  present  state  of  trade  of  the  coun- 
try, look  at  the  contentment  of  the  people;  look  at  the  wealth 
and  prosperity  which  pervades  every  class  of  the  community; 
and  then,  having  done  so,  the  committee  may  be  fairly  called 
upon  to  decide  whether  they  will  interfere  with  the  continuance 
of  an  act  under  which  these  results  have  been  developed." 
Thus  did  Overstone  blow  his  own  horn  on  the  fourteenth  of 
July,  1857 ;  on  the  twelfth  of  November  of  the  same  year  the 
Ministry  had  to  suspend  on  its  own  responsibility  the  wonder- 
ful law  of  1844. 


—     260     — 

monetary  system  was  thus  developed^  iC  its  ultimate  con- 
clusions, Steuarf  s  concrete  conception  of  money  was  fi- 
nally restored  to  its  rights  by  THOMAS  TOOKE.» 
Tooke  arrives  at  his  principles  not  from  any  theory,  but 
by  a  conscientious  analysis  of  the  history  of  prices  of 
commodities  from  1793  to  1856.  In  the  first  edition  of 
his  History  of  Prices  which  appeared  in  1823,  Tooke  is 
still  under  the  complete  influence  of  the  Eicardian  the- 
ory, and  vainly  tries  to  reconcile  it  with  actual  facts. 
His  pamphlet  "On  the  Currency,"  which  appeared  after 
the  crisis  of  1825  might  even  be  considered  as  the  first 
consistent  presentation  of  the  views  which  were  later 
given  the  force  of  law  by  Overstone.  Continued  studies 
in  the  history  of  prices  forced  him,  however,  to  the  con- 
clusion that  the  direct  connection  between  prices  and  the 
volume  of  currency,  as  it  is  pictured  by  the  theory,  is  a 
mere  illusion;  that  the  expansion  and  contraction  of 
currency  which  takes  place  while  the  value  of  the  pre- 
cious metals  remains  unchanged,  is  always  the  effect 
but  never  the  cause  of  price  fluctuations ;  that  the  circu- 
lation of  money  is  in  any  event  but  a  secondary  move- 
ment; and  that  money  assumes  quite  different  forms  in 
the  actual  process  of  production  in  addition  to  that  of 
a  circulating  medium.  His  detailed  investigations  be- 
long to  a  sphere  outside  of  that  of  simple  metallic  cir- 
culation and  can  be  discussed  here  as  little  as  the  inves- 
tigations of  WILSON  and  FULLARTON  which  belong 

*  Tooke  was  entirely  ignorant  of  Steuart's  work,  as  may  be 
seen  from  his  "History  of  Prices  for  1839-1847,"  London,  1848. 
where  he  reviews  the  history  of  the  theories  of  money. 


—     261     — - 

to  the  same  class.^  None  of  these  writers  takes  a  one-sided 
view  of  money,  but  treat  it  in  its  various  aspects;  the 
treatment,  however,  is  mechanical,  without  an  attempt 
to  establish  an  organic  connection  either  between  these 
various  aspects  themselves,  or  between  them  and  the 
combined  system  of  economic  categories.  They  fall, 
therefore,  into  the  error  of  confusing  money  as  distin- 
guished from  medium  of  circulation  with  capital  or 
even  with  commodity,  although  they  are  forced  else-' 
where  to  differentiate  it  from  both/  When  gold,  e.  g., 
is  shipped  abroad,  it  practically  means  that  capital  is 
sent  abroad,  but  the  same  thing  takes  place  when  iron, 
cotton,  grain,  or  any  other  commodity  is  exported.  Both 
are  capital  and  are  distinguished  not  as  capital,  but  as 
money  and  commodity.  The  function  of  gold  as  the 
international  medium  of  exchange  springs,  therefore, 

*  Tooke's  most  important  work  besides  the  "History  of  Prices" 
which  his  co-worker  Newmarch  published  in  six  volumes,  is 
"An  Inquiry  into  the  Currency  Principle,  the  Connection  of  the 
Currency  with  Prices"  etc.,  2nd  edition,  London,  1844.  Wil- 
son's book  we  have  already  quoted.  Finally  there  is  to  be  men- 
tioned John  Fullarton's  "On  the  Regulation  of  Currencies,"  2d 
edition,  London,  1845. 

*  "We  ought  to  .  .  .  distinguish  .  .  .  between  gold 
.  .  .  as  merchandise,  i.  e.  as  capital,  and  gold.  .  .  as  cur- 
rency" (Tooke,  "An  Inquiry  into  the  Currency  Principle,  etc." 
p.  10).  "Gold  and  silver  may  be  counted  upon  to  realize  on 
their  arrival  nearly  the  exact  sum  required  to  be  provided.  .  . 
gold  and  silver  possess  an  infinite  advantage  over  all  other  de- 
scription of  merchandize  .  .  .  from  the  circumstance  of 
being  universally  in  use  as  money.  .  .  It  is  not  in  tea,  coflfee, 
sugar  or  indigo  that  debts,  whether  foreign  or  domestic,  are 


—     262    — 

not  from  its  being  capital,  but  from  its  specific  char- 
acter of  money.  Similarly,  when  gold,  or  bank  notes  in 
its  place,  circulate  in  the  home  trade  as  means  of  pay- 
ment, they  constitute  capital  at  the  same  time.  But 
they  could  not  be  replaced  by  capital  in  the  form  of  com- 
modities, as  has  been  demonstrated  very  palpably  by 
crises,  for  instance.  That  is  to  say,  it  is  the  fact  that 
gold  is  distinguished  from  commodities  in  its  capacity 
of  money  and  not  in  that  of  capital,  that  makes  it  the 
means  of  payment.  Even  when  capital  is  exported  di- 
rectly as  capital,  as,  e.  g.,  when  it  is  done  for  the  pur- 
pose of  lending  abroad  a  certain  amount  on  interest,  it 
depends  on  circumstances,  whether  it  will  be  exported 
in  the  form  of  commodities  or  in  that  of  gold,  and  if  in 
the  latter  form,  it  is  due  to  the  specific  destination  of 
the  precious  metals  as  distinguished  from  commodities 
to  serve  as  money.  In  general,  these  writers  do  not  con- 
sider money  in  its  abstract  form,  as  it  is  developed  with- 
in the  sphere  of  simple  circulation  of  commodities,  and 
as  it  spontaneously  grows  out  of  the  relation  of  the  cir- 
culating  commodities.     As   a  result,   they  constantly 

usually  contracted  to  be  paid,  but  in  coin;  and  the  remittance, 
therefore,  either  in  the  identical  coin  designated,  or  in  bullion 
which  can  be  promptly  turned  into  that  coin  through  the  mint 
or  market  of  the  country  to  which  it  is  sent,  must  always  afford 
to  the  remitter,  the  most  certain,  immediate,  and  accurate 
means  of  affecting  this  object,  without  risk  of  disappointment 
from  the  failure  of  demand  or  fluctuation  of  price."  (Fuller- 
ton,  1.  c.  p.  132-133.)  "Any  other  article  (except  gold  or  sil- 
ver) might  in  quantity  or  kind  be  beyond  the  usual  demand  of 
the  country  to  which  it  is  sent."     (Tooke:  "An  Inquiry,  etc.") 


—     263     — 

vacillate  between  the  abstract  forms  of  money  which  dis- 
tinguish it  from  commodity  and  those  forms  of  it  be- 
neath which  are  concealed  concrete  relations,  such  as 
capital,  revenue,  etc/ 


^  The  transformation  of  money  into  capital  we  shall  consider 
tn  the  third  chapter  which  treats  of  capital  and  forms  the  end 
of  the  first  book. 


Introduction 


to  the 


Critique  of  Political  Economy*' 


1.   PRODUCTION  IN  GENERAL. 

The  subject  of  our  discussion  is  first  of  all  material 
production  by  individuals  as  determined  by  society,  nat- 
urally constitutes  the  starting  point.  The  individual 
and  isolated  hunter  or  fisher  who  forms  the  starting 


^This  introduction  was  first  published  in  the  Neue  Zeit  (see 
Translator's  Preface,  p.  5)  of  March  7,  14  and  21,  1903,  by 
Karl  Kantsky,  with  the  following  explanation: 

"This  article  has  been  found  among  the  posthumous  papers 
of  Karl  Marx.  It  is  a  fragmentary  sketch  of  a  treatise  that 
was  to  have  served  as  an  introduction  to  his  main  work,  which 
he  had  been  writing  for  many  years  and  whose  outline  was 
clearly  formed  in  his  mind.    The  manuscript  is  dated  August 


—     266     — 

point  with  Smith  and  Ricardo,  belongs  to  the  insipid 
illusions  of  the  eighteenth  century.  They  are  Robin- 
sonades  which  do  not  by  any  means  represent,  as  stu- 
dents of  the  history  of  civilization  imagine,  a  reaction 
against  over-refinement  and  a  return  to  a  misunderstood 
natural  life.  They  are  no  more  based  on  such  a  natural- 
ism than  is  Rosseau's  "contrat  social,''  which  makes  nat- 
urally independent  individuals  come  in  contact  and  have 
mutual  intercourse  by  contract.  They  are  the  fiction 
and  only  the  aesthetic  fiction  of  the  small  and  great 
Robinsonades.  They  are,  moreover,  the  anticipation  of 
'^bourgeois  society,"  which  had  been  in  course  of  de- 


23,  1857.  ...  As  the  idea  is  very  often  indicated  only  in 
fragmentary  sentences,  I  have  taken  the  liberty  of  introducing 
here  and  there  changes  in  style,  insertions  of  words,  etc.  . 
.  .  A  mere  reprint  of  the  original  would  have  made  it  un- 
intelligible. .  .  Not  all  the  words  in  the  manuscript  are 
legible.    ,     .    . 

"Wherever  there  could  be  no  doubt  as  to  the  necessity  of 
corrections,  I  did  so  without  indicating  them  in  the  text;  in 
other  cases  I  put  all  insertions  in  brackets.  Wherever  I  aw 
not  certain  as  to  whether  I  have  deciphered  a  word  correctly,  I 
have  put  an  interrogation  point  after  it;  other  changes  are 
specially  noted.  In  all  other  respects  this  is  an  exact  reprint 
of  the  original,  whose  fragmentary  and  incomplete  passages 
serve  to  remind  us  only  too  painfully  of  the  many  treasures  of 
thought  which  went  down  to  the  grave  with  Marx,  treasures 
which  would  have  suflSced  for  generations  if  Marx  had  not  so 
anxiously  avoided  giving  to  the  world  any  of  his  ideas  until  he 
had  tested  them  repeatedly  from  every  conceivable  point  oJ 
view  and  had  given  them  a  wording  that  would  be  incontro 
vertible.  In  spite  of  its  fragmentary  character  it  opens  before 
us  a  wealth  of  new  points  of  view." 


26' 


veiopment  since  the  sixteenth  century  and  made  gi- 
gantic strides  towards  maturity  in  the  eighteenth.  In 
this  society  of  free  competition  the  individual  appears 
free  from  the  bonds  of  nature,  etc.,  which  in  former 
epochs  of  history  made  him  a  part  of  a  definite,  limited 
human  conglomeration.  To  the  prophets  of  the  eigh- 
teenth century,  on  whose  shoulders  Smith  and  Ricardo 
are  still  standing,  this  eighteenth  century  individual, 
constituting  the  joint  product  of  the  dissolution  of  the 
feudal  form  of  society  and  of  the  new  forces  of  produc- 
tion which  had  developed  since  the  sixteenth  century, 
appears  as  an  ideal  whose  existence  belongs  to  the  past ; 
not  as  a  result  of  history,  but  as  its  starting  point.       ^^ 

Since  that  individual  appeared  to  be  in  conformity 
with  nature  and  [corresponded]  to  their  conception  of 
human  nature,  [he  was  regarded]  not  as  a  product  of 
history,  but  of  nature.  This  illusion  has  been  charac- 
teristic of  every  new  epoch  in  the  past.  Steuart,  who,  as 
an  aristocrat,  stood  more  firmly  on  historical  groimd, 
contrary  to  the  spirit  of  the  eighteenth  century,  escaped 
this  simplicity  of  view.  The  further  back  we  go  into 
history,  the  more  the  individual  and,  therefore,  the 
producing  individual  seems  to  depend  on  and  constitute 
a  part  of  a  larger  whole :  at  first  it  is,  quite  naturally, 
the  family  and  the  clan,  which  is  but  an  enlarged  family ; 
later  on,  it  is  the  community  growing  up  in  its  different 
forms  out  of  the  clash  and  the  amalgamation  of  clans. 
It  is  but  in  the  eighteenth  century,  in  bourgeois 
society,"  that  the  different  forms  of  social  union  con-  ^/  \ 
front  the  individual  as  a  mere  means  to  his  private  ends, 
as  an  outward  necessity.    But  the  period  in  which  this 


y 


—     268     — 

view  of  the  isolated  individual  becomes  pW/^akat,  is  the 
very  one  in  which  the  interrelations  of  bociety  (general 
from  this  point  of  view)  have  reached  the  highest  state 
of  development  Man  is  in  the  most  literal  sense  of  the 
'word  a  zoon  politihon,  not  only  a  social  animal,  but  an 
animal  which  can  develop  into  an  individual  only  in 
society.  Production  by  isolated  individuals  outside  of 
society — something  which  might  happen  as  an  excep- 
tion to  a  civilized  man  who  by  accident  got  into  the 
wilderness  and  already  dynamically  possessed  within 
himself  the  forces  of  society — is_as  great  an  absurdity 
as  the  idea  of  the  development  of  language  without  in- 
dividuals living  together  and  talking  to  one  another.  We 
need  not  dwell  on  this  any  longer.  It  would  not  be  neces- 
sary to  touch  upon  this  point  at  all,  were  not  the  vagary 
which  had  its  justification  and  sense  with  the  people  of 
the  eighteenth  century  transplanted  in  all  earnest  into 
the  field  of  political  economy  by  Ba&tiat,  Carey,  Proud- 
hon  and  others.  Proudhon  and  others  naturally  find  it 
very  pleasant,  when  they  do  not  know  the  historical 
origin  of  a  certain  economic  phenomenon,  to  give  it  a 
quasi  historico-philosopohical  explanation  by  going  into 
mjrthology.  Adam  or  Prometheus  hit  upon  the  scheme 
cut  and  dried,  whereupon  it  was  adopted,  etc.  Nothing 
is  more  tediously  dry  than  the  dreaming  locus  com- 
munis. 

Whenever  we  speak,  therefore,  of  production,  we  al- 
ways have  in  mind  production  at  a  certain  stage  of  social 
development,  or  production  by  social  individuals.  Hence, 
it  might  seem  that  in  order  to  speak  of  production  at 
all,  we  must  either  trace  the  historical  process  of  de- 


—     269     — 

velopment  through  its  various  phases,  or  declare  at  the 
outset  that  we  are  dealing  with  a  certain  historical  pe- 
riod, as,  e.  g.,  with  modem  capitalistic  production  which, 
as  a  matter  of  fact,  constitutes  the  subject  proper  of 
this  work.  But  all  stages  of  production  have  certain 
landmarks  in  common,  common  purposes.  Production 
in  general  is  an  abstraction,  but  it  is  a  rational  abstrac- 
tion, in  so  far  as  it  singles  out  and  fixes  the  common 
features,  thereby  saving  us  repetition.  Yet  these  gen- 
eral or  common  features  xiiscovered  by  comparison  con- 
stitute something  very  complex,  whose  constituent  ele- 
ments have  different  destinations.  Some  of  these  ele- 
ments belong  to  all  epochs,  others  are  common  to  a 
few.  Some  of  them  are  common  to  the  most  modern  as 
well  as  to  the  most  ancient  epochs.  No  production  is 
conceivable  without  them ;  but  while  even  the  most  com- 
pletely developed  languages  have  laws  and  conditions  in 
common  with  the  least  developed  ones,  what  is  charac- 
teristic of  their  development  are  the  points  of  departure 
from  the  general  and  common.  The  conditions  which 
generally  govern  production  must  be  differentiated  in 
order  that  the  essential  points  of  differeiice"be  hot  lost 
sight  of  in  view  of  thegeneral  uniformity  which  is  due 
to  the  facV  that  the  subject,  mankind,  and  the  object, 
nature,  remain  the  same.  The  failure  to  remember  this 
one  fact  is  the  source  of  all  the  wisdom  of  modem 
economists  who  are  trying  to  prove  the  eternal  nature 
and  harmony  of  existing  social  conditions.  Thus  they 
say,  e.  g.,  that  no  production  is  possible  without  some 
instrument  of  production,  let  that  instrument  be  only 
the  hand;  that  none  is  possible  without  past  accumu- 


270 


lated  labor,  even  if  that  labor  consist  of  mere  skill 
which  has  been  accumulated  and  concentrated  in  the 
hand  of  the  savage  by  repeated  exercise.  Capital  is, 
among  other  things,  also  an  instrument  of  production, 
also  past  impersonal  labor.  Hence  capital  is  a  universal, 
eternal  natural  phenomenon;  which  is  true  if  we  disre- 
gard the  specific  properties  which  turn  an  ''instrument 
of  production"  and  "stored  up  labor^'  into  capital.  The 
entire  history  of  production  appears  to  a  man  like  Carey, 
e.  g.,  as  a  malicious  perversion  on  the  part  of  govern- 
ments. 

If  there  is  no  production  in  general,  there  is 
also  no  general  production.  Production  is  always 
some  special  branch  of  production  or  an  aggregate, 
as,  e.  g.,  agriculture,  stock  raising,  manufactures,  etc. 
But  political  economy  is  not  technology.  The  connec- 
tion between  the  general  destinations  of  production  at  a 
given  stage  of  social  development  and  the  particular 
forms  of  production,  is  to  be  developed  elsewhere  (later 
on). 

Finally,  production  is  not  only  of  a  special  kind.  It 
is  always  a  certain  body  politic,  a  social  personality  that 
is  engaged  on  a  larger  or  smaller  aggregate  of  branches 
of  production.  The  connection  between  the  real  pro- 
cess and  its  scientific  presentation  also  falls  outside  of 
the  scope  of  this  treatise.  [We  must  thus  distinguish 
between]  production  in  general,  special  branches  of 
production  and  production  as  a  whole. 

It  is  the  fashion  with  economists  to  open  their  works 
with  a  general  introduction,  which  is  entitled  "produc- 


—    271     — 

tion''  (see,  e.  g.,  John  Stuart  Mill)  and  deals  with  the 
general  "requisites  of  production." 

This  general  introductory  part  treats  or  is  supposed 
to  treat: 

1.  Of  the  conditions  without  which  production  is  im- 
possible, i.  e.,  of  the  most  essential  conditions  of  pro- 
duction. As  a  matter  of  fact,  however,  it  dwindles  down, 
as  we  shall  see,  to  a  few  very  simple  d  afinitions,  which 
flatten  out  into  shallow  tautologies; 

2.  Of  conditions  which  further  production  more  or 
less,  as,  e.  g.,  Adam  Smith's  [discussion  of]  a  progres- 
sive and  stagnant  state  of  society. 

In  order  to  give  scientific  value  to  what  serves  with 
him  as  a  mere  summary,  it  would  be  necessary  to  study 
the  degree  of  productivity  by  periods  in  the  development 
of  individual  nations;  such  a  study  falls  outside  of  the 
scope  of  the  present  subject,  and  in  so  far  as  it  does  be- 
long here  is  to  be  brought  out  in  connection  with  the 
discussion  of  competition,  accumulation,  etc.  The  com- 
monly accepted  view  of  the  matter  gives  a  general  an- 
swer to  the  effect  that  an  industrial  nation  is  at  the 
height  of  its  production  at  the  moment  when  it  reaches 
its  historical  climax  in  all  respects.  Or,  that  certain 
races,  climates,  natural  conditions,  such  as  distance  from 
the  sea,  fertility  of  the  soil,  etc.,  are  more  favorable  to 
production  than  others.  That  again  comes  down  to  the 
tautology  that  the  facility  of  creating  wealth  depends  on 
the  extent  to  which  its  elements  are  present  both  sub- 
jectively and  objectively.  As  a  matter  of  fact  a  nation  is 
at  its  industrial  height  so  long  as  its  main  object  is  not 


s/ 


y 


272 


gain,  but  the  process  of  gaining.     In  that  respect  the 
Yankees  stand  above  the  English. 

But  all  that  is  not  what  the  economists  are  really  after 
in  the  general  introductory  part.  Their  object  is  rather 
to  represent  production  in  contradistinction  to  dis- 
tribution— see  Mill,  e.  g. — as  subject  to  eternal  laws  in- 
dependent of  history,  and  then  to  substitute  bourgeois 
relations,  in  an  underhand  way,  as  immutable  natural 
laws  of  society  m  abstracto.  This  is  the  more  or  less 
conscious  aim  of  the  entire  proceeding.  On  the  con- 
trary, when  it  comes  to  distribution,  mankind  is  sup^ 
posed  to  have  indulged  in  all  sorts  of  arbitrary  action 
Quite  apart  from  the  fact  that  they  violently  break  the 
ties  which  bind  production  and  distribution  together,  so 
much  must  be  clear  from  the  outset :  that,  no  matter  how 
greatly  the  systems  of  distribution  may  vary  at  different 
stages  of  society,  it  should  be  possible  here,  as  in  the  case 
of  production,  to  discover  the  common  features  and  to 
confound  and  eliminate  all  historical  differences  in 
formulating  general  human  laws.  E.  g.,  the  slave,  the 
serf,  the  wage-worker — all  receive  a  quantity  of  food, 
which  enables  them  to  exist  as  slave,  serf,  and  wage- 
worker.  The  conqueror,  the  official,  the  landlord,  the 
monk,  or  the  levite,  who  respectively  live  on  tribute, 
taxes,  rent,  alms,  and  the  tithe, — all  receive  [a  part] 
of  the  social  product  which  is  determined  by  laws  differ- 
ent from  those  which  determine  the  part  received  by  the 
slave,  etc.  The  two  main  points  which  all  economists 
place  under  this  head,  are:  first,  property;  second,  the 
protection  of  the  latter  by  the  administration  of  justice, 


—     273     — 

police,  etc.  The  objections  to  these  two  points  can  be 
stated  very  briefly. 

1.  All  production  is  appropriation  of  nature  by  the 
individual  within  and  through  a  definite  form  of  society. 
In  that  sense  it  is  a  tautology  to  say  that  property  (ap- 
propriation) is  a  condition  of  production.  But  it  be- 
comes ridiculous,  when  from  that  one  jumps  at  once  to 
a  definite  form  of  property,  e.  g.  private  property  (which 
implies,  besides,  as  a  prerequisite  the  existence  of  an  op- 
posite form,  viz.  absence  of  property).  History  points 
rather  to  common  property  (e.  g.  among  the  Hindoos, 
Slavs,  ancient  Celts,  etc.)  as  the  primitive  form,  which 
still  plays  an  important  part  at  a  much  later  period  as 
communal  property.  The  question  as  to  whether 
wealth  grows  more  rapidly  under  this  or  that  form  of 
property,  is  not  even  raised  here  as  yet.  But  that  there 
can  be  no  such  a  thing  as  production,  nor,  consequently, 
society,  where  property  does  not  exist  in  any  form,  is  a 
tautology.  Appropriation  which  does  not  appropriate  is 
a  contradictio  in  subjecto. 

3.  Protection  of  property,  etc.  Reduced  to  their  real 
meaning,  these  commonplaces  express  more  than  what 
their  preachers  know,  namely,  that  every  form  of  pro- 
duction creates  its  own  legal  relations,  forms  of  govern- 
ment, etc.  The  crudity  and  the  shortcoming  of  the 
conception  lie  in  the  tendency  to  see  but  an  accidental  re- 
flective connection  in  what  constitutes  an  organic  union. 
The  bourgeois  economists  have  a  vague  notion  that  it  is 
better  to  carry  on  production  under  the  modem  police, 
than  it  was,  e.  g.  under  club-law.  They  forget  that 
club  law  is  also  law,  and  that  the  right  of  the  stronger 


l/ 


274 


continues  to  exist  in  other  forms  even  under  their  "gov- 
ernment of  law/^ 

When  the  social  conditions  corresponding  to  a  certain 
stage  of  production  are  in  a  state  of  formation  or  disap- 
pearance, disturbances  of  production  naturally  arise, 
although  differing  in  extent  and  effect. 

To  sum  up:  all  the  stages  of  production  have  cer- 
tain destinations  in  common,  which  we  generalize  in 
thought ;  but  the  so-called  general  conditions  of  all  pro- 
duction are  nothing  but  abstract  conceptions  which  do 
not  go  to  make  up  any  real  stage  in  the  history  of  produc- 
tion. 

2.    THE  GENERAL  RELATION  OF  PRODUCTION  TO  DISTRIBU- 
TION, EXCHANGE,  AND  CONSUMPTION. 

Before  going  into  a  further  analysis  of  production,  it 
is  necessary  to  look  at  the  various  divisions  which  econ- 
omists put  side  by  side  with  it.  The  most  shallow  con- 
ception is  as  follows:  By  production,  the  members  of 
society  appropriate  (produce  and  shape)  the  products 
of  nature  to  human  wants;  distribution  determines  the 
proportion  in  which  the  individual  participates  in  this 
production ;  exchange  brings  him  the  particular  products 
into  which  he  wishes  to  turn  the  quantity  secured  by 
him  through  distribution;  finally,  through  consumption 
the  products  become  objects  of  use  and  enjoyment,  of  in- 
dividual appropriation.  Production  yields  goods  adopt- 
ed to  our  needs;  distribution  distributes  them  accord- 
ing to  social  laws ;  exchange  distributes  further  what  has 
already  been  distributed,  according  to  individual  wants ; 


275 


finaUy,  in  consumption  the  product  drops  out  of  the 
social  movement,  becoming  the  direct  object  of  the  in- 
dividual want  which  it  serves  and  satisfies  in  use. 
Production  thus  appears  as  the  starting  point ;  consump- 
tion as  the  final  end;  and  distribution  and  exchange  as 
the  middle;  the  latter  has  a  double  aspect,  distribution 
being  defined  as  a  process  carried  on  by  society,  while 
exchange,  as  one  proceeding  from  the  individuaL  In 
production  the  person  is  embodied  in  things,  in  [con- 
sumption*] things  are  embodied  in  persons ;  in  distribu- 
tion, society  assumes  the  part  of  go-between  of  produc- 
tion and  consumption  in  the  form  of  generally  prevailing 
rules ;  in  exchange  this  is  accomplished  by  the  accidental 
make-up  of  the  individuaL 

Distribution  determines  what  proportion  (quantity) 
of  the  products  the  individual  is  to  receive ;  exchange  de- 
termines the  products  in  which  the  indi\idual  desires  to 
receive  his  share  allotted  to  him  by  distribution. 

Production,  distribution,  exchange,  and  consumption 
thus  form  a  perfect  connection,  production  standing  for 
the  general,  distribution  and  exchange  for  the  special, 
and  consumption  for  the  individual,  in  which  all  are 
joined  together.  To  be  sure  this  is  a  connection,  but  it 
does  not  go  very  deep.  Production  is  determined  [ac- 
cording to  the  economists]  by  universal  natural  laws, 
while  distribution  depends  on  social  chance :  distribution 
can,  therefore,  have  a  more  or  less  stimulating  effect  on 
production:  exchange  lies  between  the  two  as  a  formal 
(?)  social  movement,  and  the  final  act  of  consumption 

^  The  original  reads  "person." 


—     276     — 

which  is  considered  not  only  as  a  final  purpose,  but  also 
as  a  final  aim,  falls,  properly,  outside  of  the  scope  of 
economics,  except  in  so  far  as  it  reacts  on  the  starting 
point  and  causes  the  entire  process  to  begin  all  over 
again. 

The  opponents  of  the  economists — ^whether  econo- 
mists themselves  or  not — who  reproach  them  with  tear- 
ing apart,  like^  barbarians,  what  is  an  organic  whole, 
either  stand  on  common  ground  with  them  or  are  below 
them.  Nothing  is  more  common  than  the  charge  that 
the  economists  have  been  considering  production  as  an 
end  in  itself,  too  much  to  the  exclusion  of  everything  else. 
The  same  has  been  said  with  regard  to  distribution. 
This  accusation  is  itself  based  on  the  economic  concep- 
tion that  distribution  exists  side  by  side  with  production 
as  a  self-contained,  independent  sphere.  Or  [they  are 
accused]  that  the  various  factors  are  not  treated  by  them 
in  their  connection  as  a  w^hole.  As  though  it  were  the 
text  books  that  impress  this  separation  upon  life  and  not 
life  upon  the  text  books;  and  the  subject  at  issue  were 
a  dialectic  balancing  of  conceptions  and  not  an  analysis 
of  real  conditions. 

a.  Production  is  at  the  same  time  also  consumption. 
Twofold  consumption,  subjective  and  objective.  The  in- 
dividual who  develops  his  faculties  in  production,  is  also 
expending  them,  consuming  them  in  the  act  of  produc- 
tion, just  as  procreation  is  in  its  way  a  consumption  of 
vital  powers.  In  the  second  place,  production  is  con- 
sumption of  means  of  production  which  are  used  and 
used  up  and  partly  (as  e.  g.  in  burning)  reduced  ia 
their  natural  elements.     The  same  is  true  of  the  con- 


—     277     — 

sumption  of  raw  materials  which  do  not  remain  in  their 
natural  form  and  state,  being  greatly  absorbed  in  the 
process.  The  act  of  production  is,  therefore,  in  all  its 
aspects  an  act  of  consumption  as  well.  But  this  is  ad- 
mitted by  economists.  Production  as  directly  identical 
with  consumption,  consumption  as  directly  coincident 
with  production,  they  call  productive  consumption.  This 
identity  of  production  and  consumption  finds  its  ex- 
pression in  Spinoza's  proposition,  Determinatio  est  nega- 
iio.  But  this  definition  of  productive  consumption  is  re- 
sorted to  just  for  the  purpose  of  distinguishing  between 
consumption  as  identical  with  production  and  consump- 
tion proper,  which  is  defined  as  its  destructive  counter- 
part.    Let  us  then  consider  consumption  proper. 

Consumption  is  directly  also  production,  just  as  in  na- 
ture the  consumption  of  the  elements  and  of  chemical 
matter  constitutes  production  of  plants.  It  is  clear, 
that  in  nutrition,  e.  g.,  which  is  but  one  form  of  con- 
sumption, man  produces  his  own  body ;  but  it  is  equally 
true  of  every  kind  of  consumption,  which  goes  to  pro- 
duce the  human  being  in  one  way  or  another.  [It  is] 
consumptive  production.  But,  say  the  economists,  this 
production  which  is  identical  with  consumption,  is  a 
second  production  resulting  from  the  destruction  of  the 
product  of  the  first.  In  the  first,  the  producer  trans- 
forms himself  into  things;  in  the  second,  things  are 
transformed  into  human  beings.  Consequently,  this 
consumptive  production — although  constituting  a  direct 
unity  of  production  and  consumption — differs  essentially 
from  production  proper.  The  direct  unity  in  which  pro- 
duction coincides  with  consumption  and  consumption 


278 


with  production,  does  not  interfere  with  their  direct 
duality. 

Production  is  thus  at  the  same  time  consumption,  and 
consumption  is  at  the  same  time  production.  Each  is 
directly  its  own  counterpart.  But  at  the  same  time  an 
intermediary  movement  goes  on  between  the  two.  Produc- 
tion furthers  consumption  by  creating  material  for  the 
latter  which  otherwise  would  lack  its  object.  But  con- 
sumption in  its  turn  furthers  production,  by  providing 
for  the  products  the  individual  for  whom  they  are 
products.  The  product  receives  its  last  finishing  touches 
in  consumption.  A  railroad  on  which  no  one  rides, 
which  is,  consequently  not  used  up,  not  consumed,  is  but 
a  potential  railroad,  and  not  a  real  one.  Without  pro- 
/  duction,  no  consumption;  but,  on  the  other  hand,  with- 
out consumption,  no  production ;  since  production  would 
then  be  without  a  purpose.  Consumption  produces 
production  in  two  ways. 

In  the  first  place,  in  that  the  product  first  becomes  a 
real  product  in  consumption;  e.  g.,  a  garment  becomes 
a  real  garment  only  through  the  act  of  being  worn;  a 
dwelling  which  is  not  inhabited,  is  really  no  dwelling ; 
consequently,  a  product  as  distinguished  from  a  mere 
natural  object,  proves  to  be  such,  first  becomes  a  product 
in  consumption.  Consumption  gives  the  product  the 
finishing  touch  by  annihilating  it,  since  a  product  is  the 
[result]  of  production  not  only  as  the  material  embodi- 
ment of  axitivity,  but  also  as  a  mere  object  for  the  active 
subject. 

In  the  second  place,  consumption  produces  produc- 
tion by  creating  the  necessity  for  new  production,  i.  e. 


279 


by  providing  the  ideal,  inward,  impelling  cause  which 
constitutes  the  prerequisite  of  production.  Consump- 
tion furnishes  the  impulse  for  production  as  well  as  its 
object,  which  plays  in  production  the  part  of  its  guiding 
aim.  It  is  clear  that  while  production  furnishes  the 
material  object  of  consumption,  consumption  provides 
the  ideal  object  of  production,  as  its  image,  its  want,  its 
impulse  and  its  purpose.  It  furnishes  the  object  of 
production  in  its  subjective  form.  No  wants,  no  produc- 
tion.   But  consumption  reproduces  the  want. 

In  its  turn,  production 

First,  furnishes  consumption*  with  its  material,  its 
object.  Consumption  without  an  object  is  no  consump- 
tion, hence  production  works  in  this  direction  by  pro- 
ducing consumption. 

Second.  But  it  is  not  only  the  object  that  production 
provides  for  consumption.  It  gives  consumption  its 
definite  outline,  its  character,  its  finish.  Just  as  con- 
sumption gives  the  product  its  finishing  touch  as  a 
product,  production  puts  the  finishing  touch  on  consump- 
tion. For  the  object  is  not  simply  an  object  in  general, 
but  a  definite  object,  which  is  consumed  in  a  certain 
definite  manner  prescribed  in  its  turn  by  production. 
Hunger  is  hunger ;  but  the  hunger  that  is  satisfied  with 
cooked  meat  eaten  with  fork  and  knife  is  a  different  kind 
of  hunger  from  the  one  that  devours  raw  meat  with  the 
aid  of  hands,  nails,  and  teeth.  Not  only  the  object  of 
consumption,  but  also  the  manner  of  consumption  is 
produced  by  production;  that  is  to  say,  consumption  is 

^  The  manuscript  reads  "production." 


280 


created  by  production  not  only  objectively,  but  also  sub- 
jectively.    PrMuctioJi_iima-.creates_  the  consumers. 

Third.  Production  not  only  supplies  the  want  with 
material,  but  supplies  the  material  with  a  want.  When 
consumption  emerges  from  its  first  stage  of  natural 
crudeness  and  directness — and  its  continuation  in  that 
state  would  in  itself  be  the  result  of  a  production  still 
remaining  in  a  state  of  natural  crudeness — it  is  itself 
furthered  by  its  object  as  a  moving  spring.  The  want 
of  it  which  consumption  experiences  is  created  by  its 
appreciation  of  the  product.  The  object  of  art,  as  well 
as  any  other  product,  creates  an  artistic  and  beauty- 
enjoying  public.  Production  thus  produces  not  only  an 
object  for  the  individual,  but  also  an  individual  for  the 
object. 

Production  thus  produces  consumption:  first,  by  fur- 
nishing the  latter  with  material;  second,  by  determin- 
ing the  manner  of  consumption;  third,  by  creating  in 
consumers  a  want  for  its  products  as  objects  of  con- 
sumption. It  thus  produces  the  object,  the  manner,  and 
the  moving  spring  of  consumption.  In  the  same  man- 
ner, consumption  [creates]  the  disposition  of  the  pro- 
ducer by  setting  (?)  him  up  as  an  aim  and  by  stimulat- 
ing wants.  The  identity  of  consimiption  and  production 
thus  appears  to  be  a  three  fold  one. 

First,  direct  identity :  production  is  consumption ;  con- 
sumption is  production.  Consumptive  production. 
Productive  consumption.  Economists  call  t)oth  productive 
consumption,  but  make  one  distinction  by  calling  the 
former  reproduction,  and  the  latter  productive  consump- 
tion.    All  inquiries  into  the  former  deal  >ith  productive 


—     281     — 

and  unproductive  labor;  those  into  the  latter  treat  of 
productive  and  unproductive  consumption. 

Second.  Each  appears  as  the  means  of  the  other  and  as 
being  brought  about  by  the  other,  which  is  expressed 
as  their  mutual  interdependence ;  a  relation,  by  virtue  of 
which  they  appear  as  mutually  connected  and  indis- 
pensable, yet  remaining  outside  of  each  other. 

Production  creates  the  material  as  the  outward  ob- 
ject of  consumption;  consumption  creates  the  want  as 
the  inward  object,  the  purpose  of  production.  With- 
out production,  no  consumption;  without  consumption, 
no  production;  this  maxim  figures  (?)  in  political  econ- 
omy in  many  forms. 

Third.  Production  is  not  only  directly  consumption 
and  consumption  directly  production ;  nor  is  production 
merely  a  means  of  consumption  and  consumption  the 
purpose  of  production.  In  other  words,  not  only  does 
each  furnish  the  other  with  its  object;  production,  the 
material  object  of  consumption;  consumption,  the  ideal 
object  of  production.  On  the  contrary,  either  one  is 
not  only  directly  the  other,  not  (?)  only  a  means  of  fur- 
thering the  other,  but  while  it  is  taking  place,  creates  the 
other  as  such  for  itself  (?).  Consmnptign^completes- 
the  act  of  production  by  giving  the  finishing  touch  to 
the  product  as  such,  by  destroying  the  latter,  by  break- 
ing up  its  independent  material  form;  by  bringing  to 
a^state  of  readiness,  through  the  necessity  of  repetition, 
the  disposition  to  produce  developed  in  the  first  act  of 
production ;  that  is  to  say,  it  is  not  only  the  concluding 
act  through  which  the  product  becomes  a  product,  but 
also   [the  one]   through  which  the  producer  becomes  a 


—    282    — 

producer.  On  the  other  hand,  production  produces  caa* 
sumption,  by  determining  the  manner  of  consumption, 
and  further,  by  creating  the  incentive  for  consumption, 
the  very  ability  to  consume,  in  the  form  of  want.  This 
latter  identity  mentioned  under  point  3,  is  much  dis- 
cussed in  political  economy  in  connection  with  the  treat- 
ment of  the  relations  of  demand  and  supply,  of  objects 
and  wants,  of  natural  wants  and  those  created  by  society. 
Hence,  it  is  the  simplest  matter  with  a  Hegelian  to 
treat  production  and  consumption  as  identical.  And 
this  has  been  done  not  only  by  socialist  writers  of  fiction 
but  even  by  economists,  e.  g.  Say ;  the  latter  maintained 
that  if  we  consider  a  nation  as  a  whole,  or  mankind  in 
dbstracio — her  production  is  at  the  same  time  her  con- 
sumption. Storch  pointed  out  Say's  error  by  calling 
attention  to  the  fact  that  a  nation  does  not  entirely  con- 
sume her  product,  but  also  creates  means  of  produc- 
tion, fixed  capital,  etc.  To  consider  society  as  a  single 
individual  is  moreover  a  false  mode  of  speculative  reason- 
ing. With  an  individual,  production  and  consumption 
appear  as  different  aspects  of  one  act.  The  important 
point  to  be  emphasized  here  is  that  if  production  and 
consumption  be  considered  as  activities  of  one  individual 
or  of  separate  individuals,  they  appear  at  any  rate  as  as- 
pects of  one  process  in  which  production  forms  the  actual 
starting  point  and  is,  therefore,  the  predominating  factor. 
Consumption,  as  a  natural  necessity,  as  a  want,  con- 
stitutes an  internal  factor  of  productive  activity,  but 
the  latter  is  the  starting  point  of  realization  and,  there- 
fore, its  predominating  factor,  the  act  into  which  the 
entire  process  resolves  itself  in  the  end.     The  individual 


—    283     — 

produces  a  certain  article  and  turns  again  into  himself 
by  consuming  it;  but  he  returns  as  a  productive  and  a 
self -reproducing  individual.  Consumption  thus  appears 
as  a  factor  of  production. 

In  society,  however,  the  relation  of  the  producer  to  his 
product,  as  soon  as  it  is  completed,  is  an  outward  one,  and 
the  return  of  the  product  to  the  individual  depends  on 
his  relations  to  other  individuals.  He  does  not  take  im- 
mediate possession  of  it.  Nor  does  the  direct  appropria- 
tion of  the  product  constitute  his  purpose,  when  he  pro- 
duces in  society.  Between  the  producer  and  the  product 
distribution  steps  in,  which  determines  by  social  laws 
his  share  in  the  world  of  products;  that  is  to  say,  dis- 
tribution steps  in  between  production  and  consumption. 

Does  distribution  form  an  independent  sphere  stand- 
ing side  by  side  with  and  outside  of  production? 

b.  Production  and  Distribution.  In  perusing  the 
common  treatises  on  economics  one  can  not  help  being 
struck  with  the  fact  that  ever3rthing  is  treated  there 
twice ;  e.  g.,  under  distribution,  there  figure  rent,  wages, 
interest,  and  profit ;  while  under  production  we  find  land, 
labor,  and  capital  as  agents  of  production.  As  regards 
capital,  it  is  at  once  clear  that  it  is  counted  twice :  first, 
as  an  agent  of  production ;  second,  as  a  source  of  income ; 
as  determining  factors  and  definite  forms  of  distribution, 
interest  and  profit  figure  as  such  also  in  production,  since 
they  are  forms,  in  which  capital  increases  and  grows,  and 
are  consequwitly  factors  of  its  own  production.  Interest 
and  profit,  as  forms  of  distribution,  imply  the  existence 
of  capital  as  an  agent  of  production.  They  are  forms  of 
distribution  which  have  for  their  prerequisite  capital  as 


284 


an  agent  of  production.     They  are  also  forms  of  repri?-. 
dnction  of  capital. 

In  the  same  manner,  wages  is  wage-labor  when  con^ 
sidered  under  another  head ;  the  definite  character  which 
labor  has  in  one  case  as  an  agent  of  production,  appears 
in  the  other  as  a  form  of  distribution.  If  labor  were  not 
fixed  as  wage-labor,  its  manner  of  participation  in  dis- 
tribution^ would  not  appear  as  wages,  as  is  the  case  e.  g. 
under  slavery.  Finally,  rent — to  take  at  once  the  most  de- 
veloped form  of  distribution — ^by  means  of  which  landed 
property  receives  its  share  of  the  products,  implies  the 
existence  of  large  landed  property  (properly  speaking, 
agriculture  on  a  large  scale)  as  an  agent  of  production, 
and  not  simply  land,  no  more  than  wages  represents 
simply  labor.  The  relations  and  methods  of  distribu-. 
tion  appear,  therefore,  merely  as  the  reverse  sides  of 
the  agents  of  production.  An  individual  who  partici- 
pates in  production  as  a  wage  laborer,  receives  his  share 
of  the  products,  i.  e.  of  the  results  of  production,  in  the 
form  of  wages.  The  subdivisions  and  organization  of 
distribution  are  determined  by  the  subdivisions  and  or- 
ganization of  production.  Distribution  is  itself  a 
product  of  production,  not  only  in  so  far  as  the  material 
goods  are  concerned,  since  only  the  results  of  production 
can  be  distributed ;  but  also  as  regards  its  form,  since  the 
definite  manner  of  participation  in  production  deter- 
mines the  particular  form  of  distribution,  the  form  undei 
which  participation  in  distribution  takes  place.     It  is 


^The  manuscript  reads  "produoiion/' 


—    285    — 

quite  an  illusion  to  place  land  under  production,  rent  na- 
der  distribution,  etc. 

Economists,  like  Ricardo,  who  are  accused  above  alj  tti 
having  paid  exclusive  attention  to  production,  define  dis- 
tribution, therefore,  as  the  exclusive  subject  of  political 
economy,  because  they  instinctively^  regard  the  forms  of 
distribution  as  the  clearest  forms  in  which  the  agents 
of  production  find  expression  in  a  given  society. 

To  the  single  individual  distribution  naturally  ap- 
pears as  a  law  established  by  society  determining  his 
position  in  the  sphere  of  production,  within  which  he 
produces,  and  thus  antedating  production.  At  the  out- 
set the  individual  has  no  capital,  no  landed  property. 
From  his  birth  he  is  assigned  to  wage-labor  by  the 
social  process  of  distribution.  But  this  very  condition 
of  being  assigned  to  wage-labor  is  the  result  of  the  ex- 
istence of  capital  and  landed  property  as  independent 
agents  of  production. 

From  the  point  of  view  of  society  as  a  whole,  distri- 
bution seems  to  antedate  and  to  determine  production 
in  another  way  as  well,  as  a  pre-economic  fact,  so  to  say, 
A  conquering  people  divides  the  land  among  the  con- 
querors establishing  thereby  a  certain  division  and  form 
of  landed  property  and  determining  the  character  of 
production ;  or,  it  turns  the  conquered  people  into  slaves 
and  thus  makes  slave  labor  the  basis  of  production.  Or, 
a  nation,  by  revolution,  breaks  up  large  estates  into  small 
parcels  of  land  and  by  this  new  distribution  imparts  to 

^  The  German  text  reads  "instruktiv/*  which  I  take  to  be  & 
misprint  of  "instinktiv."    Translator. 


2SG 


production  a  new  character.  Or,  legislation  prepetuates 
land  ownership  in  large  families  or  distributes  labor  as 
an  hereditary  privilege  and  thus  fixes  it  in  castes. 

In  all  of  these  cases,  and  they  are  all  historic,  it  is 
not  distribution  that  seems  to  be  organized  and  deter- 
mined by  production,  but  on  the  contrary,  production  by 
distribution. 

In  the  most  shallow  conception  of  distribution,  the 
latter  appears  as  a  distribution  of  products  and  to  that 
extent  as  further  removed  from  and  quasi-independent 
of  production.  But  before  distribution  means  distribu- 
tion of  products,  it  is  first,  a  distribution  of  the  means 
of  production,  and  second,  what  is  practically  another 
wording  of  the  same  fact,  it  is  a  distribution  of  the  mem- 
bers of  society  among  the  various  kinds  of  production 
(the  subjection  of  individuals  to  certain  conditions  of 
production) .  The  distribution  of  products  is  manifestly 
a  result  of  this  distribution,  which  is  bound  up  with  the 
process  of  production  and  determines  the  very  organiza- 
tion of  the  latter.  To  treat  of  production  apart  from  the 
distribution  which  is  comprised  in  it,  is  plainly  an  idle 
abstraction.  Conversely,  we  know  the  character  of  the 
distribution  of  products  the  moment  we  are  given  the 
nature  of  that  other  distribution  which  forms  originally 
a  factor  of  production.  Ricardo,  who  was  concerned 
with  the  analysis  of  production  as  it  is  organized  in  mod- 
em society  and  who  was  the  economist  of  production  par 
excellence,  for  that  very  reason  declares  not  production 
but  distribution  as  the  subject  proper  of  modern  econo- 
mics. We  have  here  another  evidence  of  the  insipidity 
of  the  economists  who  treat  production  as  an  eternal 


—    287     — 

truth,  and  banish  history  to  the  domain  of  distribution. 

What  relation  to  production  this  distribution,  which 
has  a  determining  influence  on  production  itself,  as- 
sumes, is  plainly  a  question  which  falls  within  the 
province  of  production.  Should  it  be  maintained  that 
at  least  to  the  extent  that  production  depends  on  a  cer- 
tain distribution  of  the  instruments  of  production,  dis- 
tribution in  that  sense  precedes  production  and  con- 
stitutes its  prerequisite;  it  may  be  replied  that  produc- 
tion has  in  fact  its  prerequisite  conditions,  which  form 
factors  of  it.  These  may  appear  at  first  to  have  a  nat- 
ural origin.  By  the  very  process  of  production  they  are 
changed  from  natural  to  historical,  and  if  they  appear 
during  one  period  as  a  natural  prerequisite  of  produc- 
tion, they  formed  at  other  periods  its  historical  result. 
Within  the  sphere  of  production  itself  they  are  under- 
going a  constant  change.  E.  g.,  the  application  of  ma- 
chinery produces  a  change  in  the  distribution  of  the  in- 
struments of  production  as  well  as  in  that  of  products, 
and  modern  land  ownership  on  a  large  scale  is  as  much 
the  result  of  modem  trade  and  modem  industry,  as  that 
of  the  application  of  the  latter  to  agriculture. 

All  of  these  questions  resolve  themselves  in  the  last 
instance  to  this:  How  do  general  historical  conditions 
affect  production  and  what  part  does  it  play  at  all  in 
the  course  of  history?  It  is  evident  that  this  question 
can  be  taken  up  only  in  connection  with  the  discussion 
and  analysis  of  production. 

Yet  in  the  trivial  form  in  which  these  questions  are 
raised  above,  they  can  be  answered  just  as  briefly.  In 
the  case  of  all  conquests  three  ways  lie  open.    The  con- 


'    —    288    — 

quering  people  may  impose  its  own  methods  of  produc- 
tion upon  the  conquered  (e.  g.  the  English  in  Ireland  in 
the  nineteenth  century,  partly  also  in  India) ;  or,  it  may 
allow  everything  to  remain  as  it  was  contenting  itself 
with  tribute  (e.  g.  the  Turks  and  the  Romans) ;  or,  the 
two  systems  by  mutually  modifying  each  other  may  re- 
sult in  something  new,  a  synthesis  (which  partly  resulted 
from  the  Germanic  conquests).  In  all  of  these  con- 
quests the  method  of  production,  be  it  of  the  conquerors, 
the  conquered,  or  the  one  resulting  from  a  combination 
of  both,  determines  the  nature  of  the  new  distribution 
which  comes  into  play.  Although  the  latter  appears 
now  as  the  prerequisite  condition  of  the  new  period  of 
production,  it  is  in  itself  but  a  product  of  production, 
not  of  production  belonging  to  history  in  general,  but  of 
production  relating  to  a  definite  historical  period.  The 
Mongols  with  their  devastations  in  Russia  e.  g.  acted  in 
accordance  with  their  system  of  production,  for  which 
sufficient  pastures  on  large  uninhabited  stretches  of 
country  are  the  main  prerequisite.  The  Germanic  bar- 
barians, with  whom  agriculture  carried  on  with  the  aid 
of  serfs  was  the  traditional  system  of  production  and  who 
were  accustomed  to  lonely  life  in  the  country,  could  in- 
troduce the  same  conditions  in  the  Roman  provinces  so 
much  easier  since  the  concentration  of  landed  property 
which  had  taken  place  there,  did  away  completely  with 
the  older  systems  of  agriculture.  There  is  a  prevalent 
tradition  that  in  certain  periods  robbery  constituted  the 
only  source  of  living.  But  in  order  to  be  able  to  plunder, 
there  must  be  something  to  plunder,  i.  e.  there  must  be 


—     289     — 

production.*  And  even  the  method  of  plunder  is  deter- 
mined by  the  method  of  production.  A  stockjobbing  na- 
tion^ e.  g.  can  not  be  robbed  in  the  same  manner  as  a 
nation  of  shepherds. 

In  the  case  of  the  slave  the  instrument  of  production 
is  robbed  directly.  But  then  the  production  of  the  coun- 
try in  whose  interest  he  is  robbed,  must  be  so  organized 
as  to  admit  of  slave  labor,  or  (as  in  South  America,  etc.) 
a  system  of  production  must  be  introduced  adapted  to 
slavery. 

Laws  may  perpetuate  an  instrument  of  production,  e. 
g.  land,  in  certain  families.  These  laws  assume  an 
economic  importance  if  large  landed  property  is  in  har- 
mony with  the  system  of  production  prevailing  in  society, 
as  is  the  case  e.  g.  in  England.  In  France  agriculture 
had  been  carried  on  on  a  small  scale  in  spite  of  the  large 
estates,  and  the  latter  were,  therefore,  broken  up  by  the 
Revolution.  But  how  about  the  legislative  attempt  to 
perpetuate  the  minute  subdivision  of  the  land  ?  In  spite 
of  these  laws  land  ownership  is  concentrating  again.  The 
effect  of  legislation  on  the  maintenance  of  a  system  of 


*  Compare  this  with  foot-note  1,  on  p.  34  of  Capital,  Hum- 
boldt edition.  New  York: 

"Truly  comical  is  M.  Bastiat,  who  imagines  that  the  ancient 
Greeks  and  Romans  lived  by  plunder  alone.  But  when  people 
plunder  for  centuries,  there  must  always  be  something  at  hand 
for  them  to  seize;  the  objects  of  plunder  must  be  continually 
reproduced."    K.  Kautsky. 

•The  English  expression  is  used  by  Marx  in  his  German 
original.     Transl. 


—     290     — 

distribution  and  ns  resultant  influence  on  production 
are  to  be  determined  elsewhere. 

c.  Exchange  mid,  Circulation.  Circulation  is  but  a 
certain  aspect  of  exchange,  or  it  may  be  defined  as  ex- 
change considered  as  a  whole.  Since  exchange  is  an  in- 
termediary factor  between  production  and  its  dependent, 
distribution,  on  the  one  hand,  and  consumption,  on  the 
other;  and  since  the  latter  appears  but  as  a  constituent 
of  production,  exchange  is  manifestly  also  a  constituent 
part  of  production. 

In  the  first  place,  it  is  clear  that  the  exchange  of 
activities  and  abilities  which  takes  place  in  the 
sphere  of  production  falls  directly  within  the 
latter  and  constitutes  one  of  its  essential  elements. 
In  the  second  place,  the  same  is  true  of  the 
exchange   of   products,   in   so   far   as   it  is   a   means 

^  of  completing  a  certain  product,  designed  for  im- 
mediate consumption.  To  that  extent  exchange  consti- 
tutes an  act  included  in  production.  Thirdly,  the  so- 
called  exchange  between  dealers  and  dealers*  is  by  virtue 
of  its  organization  determined  by  production,  and  is  it- 
self a  species  of  productive  activity.  Exchange  appears 
to  be  independent  of  and  indifferent  to  production  only 

J.  in  the  last  stage  when  products  are  exchanged  directly 
for  consumption.     But  in  the  first  place,  there  is  no  ex- 

*  Marx  evidently  has  in  mind  here  a  passage  in  Adam  Smith's 
Wealth  of  Nations  (vol.  2,  eh.  2)  in  which  he  speaks  of  the  cir- 
culation of  a  country  as  consisting  of  two  distinct  parts:  cir* 
culation  between  dealers  and  dealers,  and  that  between  dealers 
and  consumers.  The  word  dealer  signifies  here  not  only  a  mer- 
chant or  shopkeeper,  but  also  a  producer.    K.  Kautslqr. 


>91 


change  without  a  division  of  labor,  whether  natural  or 
as  a  result  of  historical  development;  secondly,  private 
exchange  implies  the  existence  of  private  production; 
thirdly,  the  intensity  of  exchange,  as  well  as  its  extent 
and  character  are  determined  by  the  degree  of  develop- 
ment and  organization  of  production,  as  e.  g.  exchange 
between  city  and  country,  exchange  in  the  country,  in  the 
city,  etc.  Exchange  thus  appears  in  all  its  aspects  to  be 
directly  included  in  or  determined  by  production. 

The  result  we  arrive  at  is  not  that  production,  distri- 
bution, exchange,  and  consumption  are  identical,  but 
that  they  are  all  members  of  one  entity,  different  sides 
of  one  unit.  Production  predominates  not  only  over 
production  itself  in  the  opposite  sense  of  that  term,  but 
over  the  other  elements  as  well.  With  it  the  process 
constantly  starts  over  again.  That  exchange  and  con- 
sumption can  not  be  the  predominating  elements  is  self 
evident.  The  same  is  true  of  distribution  in  the  narrow 
sense  of  distribution  of  products ;  as  for  distribution  in 
the  sense  of  distribution  of  the  agents  of  production,  it 
is  itself  but  a  factor  of  production.  A  definite  [form 
of]  production  thus  determines  the  [forms  of]  consump- 
tion, distribution,  exchange,  and  also  the  mutual  rela- 
tions between  these  various  elements.  Of  course,  produc- 
tion in  its  onS'Sided  form  is  in  its  turn  influenced  by 
other  elements;  e.  g.  with  the  expansion  of  the  market, 
i.  e.  of  the  sphere  of  exchange,  production  grows  in 
volume  and  is  subdivided  to  a  greater  extent. 

With  a  change  in  distribution,  production  undergoes  a 
change ;  as  e.  g.  in  the  case  of  concentration  of  capital, 
of  a  change  in  the  distribution  of  population  in  city  and 


-—     29^     — 

country,  etc.  Finally,  the  demands  of  consumption  also 
influence  production.  A  mutual  interaction  takes  place 
between  the  various  elements.  Such  is  the  case  with 
every  organic  body. 

3.   THE  METHOD  OF  POLITICAL  ECONOMY. 

When  we  consider  a  given  country  from  a  politico- 
economic  standpoint,  we  begin  with  its  population,  then 
analyze  the  latter  according  to  its  subdivision  into  classes, 
location  in  city,  country,  or  by  the  sea,  occupation  in  dif- 
ferent branches  of  production ;  then  we  study  its  exports 
and  imports,  annual  production  and  consumption,  prices 
of  commodities,  etc.  It  seems  to  be  the  correct  pro- 
cedure to  commence  with  the  real  and  concrete  aspect  of 
conditions  as  they  are;  in  the  case  of  political  econ- 
omy, to  commence  with  population  which  is  the  basis  and 
the  author  of  the  entire  productive  activity  of  society. 
Yet,  on  closer  consideration  it  proves  to  be  wrong.  Pop- 
ulation is  an  abstraction,  if  we  leave  out  e.  g.  the  classes 
of  which  it  consists.  These  classes,  again,  are  but  an 
empty  word,  unless  we  know  what  are  the  elements  on 
which  they  are  based,  such  as  wage-labor,  capital,  etc. 
These  imply,  in  their  turn,  exchange,  division  of  labor, 
prices,  etc.  Capital,  e.  g.  does  not  mean  anything  without 
wage-labor,  value,  money,  price,  etc.  If  we  start  out, 
therefore,  with  population,  we  do  so  with  a  chaotic  con- 
ception of  the  whole,  and  by  closer  analysis  we  will  grad- 
ually arrive  at  simpler  ideas;  thus  we  shall  proceed 
from  the  imaginary  concrete  to  less  and  less  complex  ab- 
stractions, until  we  get  at  the  simplest  conception.  This 


—     293     — 

once  attained,  we  might  start  on  our  return  journey  until 
we  would  finally  come  back  to  population,  but  this  time 
not  as  a  chaotic  notion  of  an  integral  whole,  but  as  a  rich 
aggregate  of  many  conceptions  and  relations.  The 
former  method  is  the  one  which  political  economy  had 
adopted  in  the  past  at  its  inception.  The  economists  of 
the  seventeenth  century,  e.  g.,  always  started  out  with 
the  living  aggregate:  population,  nation,  state,  several 
states,  etc.,  but  in  the  end  they  invariably  arrived,  by 
means  of  analysis,  at  certain  leading,  abstract  general 
principles,  such  as  division  of  labor,  money,  value,  etc. 
As  soon  as  these  separate  elements  had  been  more  or  less 
established  by  abstract  reasoning,  there  arose  the  sys- 
tems of  political  economy  which  start  from  simple  con- 
ceptions, such  as  labor,  division  of  labor,  demand,  ex- 
change value,  and  conclude  with  state,  international  ex- 
change and  world  market.  The  latter  is  manifestly  the 
scientifically  correct  method.  The  concrete  is  concrete, 
because  it  is  a  combination  of  many  objects  with  different 
destinations,  i.  e.  a  unity  of  diverse  elements.  In  our 
thought,  it  therefore  appears  as  a  process  of  synthesis,  as 
a  result,  and  not  as  a  starting  point,  although  it  is  the 
real  starting  point  and,  therefore,  also  the  starting  point 
of  observation  and  conception.  By  the  former  method 
the  complete  conception  passes  into  an  abstract  defini- 
tion; by  the  latter,  the  abstract  definitions  lead  to  tho 
reproduction  of  the  concrete  subject  in  the  course  of 
reasoning.  Hegel  fell  into  the  error,  therefore,  of  con- 
sidering the  real  as  the  result  of  self-coordinating,  self- 
absorbed,  and  spontaneously  operating  thought,  while 
the  method  of  advancing  from  the  abstract  to  the  con- 


294 


Crete  is  but  a  way  of  thinking  by  which  the  concrete  is 
grasped  and  is  reproduced  in  our  mind  as  a  concrete.  It 
is  by  no  means,  however,  the  process  which  itself  gen- 
erates the  concrete.  The  simplest  economic  category, 
say,  exchange  value,  implies  the  existence  of  population, 
population  that  is  engaged  in  production  under  certain 
conditions ;  it  also  implies  the  existence  of  certain  types 
of  family,  clan,  or  state,  etc.  It  can  have  no  other  ex- 
istence except  as  an  abstract  one-sided  relation  of  an 
already  given  concrete  and  living  aggregate. 

As  a  category,  however,  exchange  value  leads  an  an- 
tediluvian existence.  And  since  our  philosophic  con- 
sciousness is  so  arranged  that  only  the  image  of  the  man 
that  it  conceives  appears  to  it  as  the  real  man  and  the 
world  as  it  conceives  it,  as  the  real  world;  it  mistakes 
the  movement  of  categories  for  the  real  act  of  produc- 
tion (which  unfortunately  (?)  receives  only  its  impetus 
from  outside)  whose  result  is  the  world ;  that  is  true — 
here  we  have,  however,  again  a  tautology — in  so  far  as 
the  concrete  aggregate  is  a  thought  aggregate,  in  so  far  as 
the  concrete  subject  of  our  thought  is  in  fact  a  product 
of  thought,  of  comprehension ;  not,  however,  in  the  sense 
of  a  product  of  a  self-emanating  conception  which  works 
outside  of  and  stands  above  observation  and  imagination, 
but  of  a  mental  consummation  of  observation  and  imagi- 
nation. The  whole,  as  it  appears  in  our  heads  as  a 
thought-aggregate,  is  the  product  of  a  thinking  mind 
which  grasps  the  world  in  the  only  way  open  to  it,  a  way 
which  differs  from  the  one  employed  by  the  artistic,  re- 
ligious, or  practical  mind.  The  concrete  subject  con- 
tinues to  lead  an  independent  existence  after  it  has  been 


—     295     — 

grasped,  as  it  did  before,  outside  of  the  head,  so  long  as 
the  head  contemplates  it  only  speculatively,  theoretically. 
So  that  in  the  employment  of  the  theoretical  method 
[in  political  economy],  the  subject,  society,  must  con- 
stantly be  kept  in  mind  as  the  premise  from  which  we 
start. 

But  have  these  simple  categories  no  independent  his- 
torical or  natural  existence  antedating  the  more  concrete 
ones?  Qa  depend.  For  instance,  in  his  Philosophy  of 
Law  Hegel  rightly  starts  out  with  possession,  as  the 
simplest  legal  relation  of  individuals.  But  there  is 
no  such  thing  as  possession  before  the  family  or  the  rela- 
tions of  lord  and  serf,  which  are  a  great  deal  more  con- 
crete relations,  have  come  into  existence.  On  the  other 
hand,  one  would  be  right  in  saying  that  there  are 
families  and  clans  which  only  possess,  but  do  not  own 
things.  The  simpler  category  thus  appears  as  a  rela- 
tion of  simple  family  and  clan  commimities  with  respect 
to  property.  In  earlier  society  the  category  appears  as 
a  simple  relation  of  a  developed  organism,  but  the  con- 
crete substratum  from  which  springs  the  relation  of  pos- 
session, is  always  implied.  One  can  imagine  an  isolated 
savage  in  possession  of  things.  But  in  that  case  pos- 
session is  no  legal  relation.  It  is  not  true  that  the  family 
came  as  the  result  of  the  historical  evolution  of  pos- 
session. On  the  contrary,  the  latter  always  implies  the 
existence  of  this  "more  concrete  category  of  law."  Yet 
so  much  may  be  said,  that  the  simple  categories  are  the 
expression  of  relations  in  which  the  less  developed  con- 
crete entity  may  have  been  realized  without  entering 
into  the  manifold   relations   and  bearings  which  are 


—     296     — 

mentally  expressed  in  the  concrete  category;  but  when 
the  concrete  entity  attains  fuller  development  it  will 
retain  the  same  category  as  a  subordinate  relation. 

Money  may  exist  and  actually  had  existed  in  history 
before  capital,  or  banks,  or  wage-labor  came  into  exist- 
ence. With  that  in  mind,  it  may  be  said  that  the  more 
simple  category  can  serve  as  an  expression  of  the  pre- 
dominant relations  of  an  undeveloped  whole  or  of  the 
subordinate  relations  of  a  more  developed  whole,  [rela- 
tions] which  had  historically  existed  before  the  whole 
developed  in  the  direction  expressed  in  the  more  concrete 
category.  In  so  far,  the  laws  of  abstract  reasoning  which 
ascends  from  the  most  simple  to  the  complex,  corre- 
spond to  the  actual  process  of  history. 

On  the  other  hand,  it  may  be  said  that  there  are  highly 
developed  but  historically  unripe  forms  of  society  in 
which  the  highest  economic  forms  are  to  be  found,  such 
as  co-operation,  advanced  division  of  labor,  etc.,  and  yet 
there  is  no  money  in  existence,  e.  g.  Peru. 

In  Slavic  communities  also,  money,  as  well  as  ex- 
change to  which  it  owes  its  existence,  does  not  appear 
at  all  or  very  little  within  the  separate  communities,  but 
it  appears  on  their  boundaries  in  their  inter-communal 
traffic;  in  general,  it  is  erroneous  to  consider  exchange 
as  a  constituent  element  originating  within  the  com- 
munity. It  appears  at  first  more  in  the  mutual  relations 
between  different  communities,  than  in  those  between 
the  members  of  the  same  community.  Furthermore,  al- 
though money  begins  to  play  its  part  everywhere  at  an 
early  stage,  it  plays  in  antiquity  the  part  of  a  pre- 
dominant element  only  in  one-sidedly  developed  nations, 


297 


VIZ.  trading  nations,  and  even  in  most  cultured  an- 
tiquity, in  Greece  and  Rome,  it  attains  its  full  develop- 
ment, which  constitutes  the  prerequisite  of  modem  bour- 
geois society,  only  in  the  period  of  their  decay.  Thus, 
this  quite  simple  category  attained  its  culmination  in  the 
past  only  at  the  most  advanced  stages  of  society.  Even 
then  it  did  not  pervade  (?)  all  economic  relations ;  in 
Rome  e.  g.  at  the  time  of  its  highest  development  taxes 
and  payments  in  kind  remained  the  basis.  As  a  matter 
of  fact,  the  money  system  was  fully  developed  there  only 
so  far  as  the  army  was  concerned ;  it  never  came  to  dom- 
inate the  entire  system  of  labor. 

Thus,  although  the  simple  category  may  have  existed 
historically  before  the  more  concrete  one,  it  can  attain  its 
complete  internal  and  external  development  only  in  com- 
plex (?)  forms  of  society,  while  the  more  concrete  cate- 
gory has  reached  its  full  development  in  a  less  advanced 
form  of  society. 

Labor  is  quite  a  simple  category.  The  idea  of  labor  in 
that  sense,  as  labor  in  general,  is  also  very  old.  Yet. 
"labor''  thus  simply  defined  by  political  economy  is  as 
much  a  modem  category,  as  the  conditions  which  have 
given  rise  to  this  simple  abstraction.  The  monetary  sys- 
tem, e.  g.  defines  wealth  quite  objectively,  as  a  thing  (  ?)  * 
in  money.  Compared  with  this  point  of  view,  it  was 
a  great  step  forward,  when  the  industrial  or  commercial 
system  came  to  see  the  source  of  wealth  not  in  the  object 
but  in  the  activity  of  persons,  viz.  in  commercial  and  in- 


^  Here  two  words  in  the  manuscript  can  not  be  deciphered. 
They  look  like  "auaser  sich"  ("outside  pf  itself') .     K.  Kautsky. 


—    298    — 

dustrial  labor.  But  even  the  latter  was  thus  considered 
only  in  the  limited  sense  of  a  money  producing  activity. 
The  physiocratic  system  [marks  still  further  progress] 
in  that  it  considers  a  certain  form  of  labor,  viz.  agricul- 
ture, as  the  source  of  wealth,  and  wealth  itself  not  in 
the  disguise  of  money,  but  as  a  product  in  general,  as 
the  general  result  of  labor.  But  corresponding  to  the 
limitations  of  the  activity,  this  product  is  still  only  a 
natural  product.  Agriculture  is  productive,  land  is  the 
source  of  production  par  excellence.  It  was  a  tremendous 
advance  on  the  part  of  Adam  Smith  to  throw  aside  all 
limitations  which  mark  wealth-producing  activity  and 
[to  define  it]  as  labor  in  general,  neither  industrial,  nor 
commercial,  nor  agricultural,  or  one  as  much  as  the  other. 
Along  with  the  universal  character  of  wealth-creating 
activity  we  have  now  the  universal  character  of  the 
object  defined  as  wealth,  viz.  product  in  general,  or  labor 
in  general,  but  as  past  incorporated  labor.  How  diffi- 
cult and  great  was  the  transition,  is  evident  from  the 
way  Adam  Smith  himself  falls  back  from  time  to  time 
into  the  physiocratic  system.  Now,  it  might  seem  as 
though  this  amounted  simply  to  finding  an  abstract  ex- 
pression for  the  simplest  relation  into  which  men  have 
been  mutually  entering  as  producers  from  times  of  yore, 
no  matter  under  what  form  of  society.  In  one  sense 
this  is  true.     In  another  it  is  not. 

The  indifference  as  to  the  particular  kind  of  labor  im- 
plies the  existence  of  a  highly  developed  aggregate  of  dif- 
ferent species  of  concrete  labor,  none  of  which  is  any 
longer  the  predominant  one.  So  do  the  most  general  ab- 
stractions commonly  arise  only  where  there  is  the  highest 


—     299     — 

concrete  development,  where  one  feature  appears  to  be 
jointly  possessed  by  many,  and  to  be  common  to  all. 
Then  it  can  not  be  thought  of  any  longer  in  one  par- 
ticular form.  On  the  other  hand,  this  abstraction  of 
labor  is  but  the  result  of  a  concrete  aggregate  of  differ- 
ent kinds  of  labor.  The  indifference  to  the  particular 
kind  of  labor  corresponds  to  a  form  of  society  in  which 
individuals  pass  with  ease  from  one  kind  of  work  to  an- 
other, which  makes  it  immaterial  to  them  what  particu- 
lar kind  of  work  may  fall  to  their  share.  Labor  has  be- 
come here,  not  only  categorically  but  really,  a  means 
of  creating  wealth  in  general  and  is  no  longer  grown  to- 
gether with  the  individual  into  one  particular  destina- 
tion. This  state  of  affairs  has  found  its  highest  develop- 
ment in  the  most  modern  of  bourgeois  societies,  the 
United  States.  It  is  only  here  that  the  abstraction  of 
the  category  "labor,^'  "labor  in  general,"  labor  sans 
phrase,  the  starting  point  of  modern  political  economy, 
becomes  realized  in  practice.  Thus,  the  simplest  abstrac- 
tion which  modern  political  economy  sets  up  as  its  start- 
ing point,  and  which  expresses  a  relation  dating  back  to 
antiquity  and  prevalent  under  all  forms  of  society,  ap- 
pears in  this  abstraction  truly  realized  only  as  a  category 
of  the  most  modern  society.  It  might  be  said  that  what 
appears  in  the  United  States  as  an  historical  product, 
— viz.  the  indifference  as  to  the  particular  kind  of  labor — 
appears  among  the  Russians  e.  g.  as  a  natural  disposi- 
tion. But  it  makes  all  the  difference  in  the  world 
whether  barbarians  have  a  natural  predisposition  which 
makes  them  applicable  alike  to  everything,  or  whether 
civilized  people  apply  themselves  to  everything.     And, 


—     300     — 

besides,  this  indifference  of  the  Russians  as  to  the  kind 
of  work  they  do,  corresponds  to  their  traditional  practice 
of  remaining  in  the  rut  of  a  quite  definite  occupation 
until  they  are  thrown  out  of  it  by  external  influences. 

This  example  of  labor  strikingly  shows  how  even  the 
most  abstract  categories,  in  spite  of  their  applicability  to 
all  epochs — ^just  because  of  their  abstract  character — are 
by  the  very  definiteness  of  the  abstraction  a  product  of 
historical  conditions  as  well,  and  are  fully  applicable 
only  to  and  under  those  conditions. 
r  'The  bourgeois  society  is  the  most  highly  developed  and 
most  highly  differentiated  historical  organization  of  pro- 
duction.j  The  categories  which  serve  as  the  expression 
of  its  conditions  and  the  comprehension  of  its  own  or- 
ganization enable  it  at  the  same  time  to  gain  an  insight 
into  the  organization  and  the  conditions  of  production 
which  had  prevailed  under  all  the  past  forms  of  society, 
on  the  ruins  and  constituent  elements  of  which  it  has 
arisen,  and  of  which  it  still  drags  along  some  unsur- 
mounted  remnants,  while  what  had  formerly  been  mere 
intimation  has  now  developed  to  complete  significance. 
The  anatomy  of  the  human  being  is  the  key  to  the 
anatomy  of  the  ape.  But  the  intimations  of  a  higher 
animal  in  lower  ones  can  be  understood  only  if  the 
animal  of  the  higher  order  is  already  known.  The 
bourgeois  economy  furnishes  a  key  to  ancient  economy, 
etc.  j  This  is,  however,  by  no  means  true  of  the  method  of 
those  economists  who  blot  out  all  historical  differences 
and  see  the  bourgeois  form  in  all  forms  of  society.  One 
can  understand  the  nature  of  tribute,  tithes,  etc.,  after 


■—    301     — 

one  has  learned  the  nature  of  rent.     But  they  must  not 
be  considered  identical. 

Since,  furthermore,  bourgeois  society  is  but  a  form 
resulting  from  the  development  of  antagonistic  elements, 
some  relations  belonging  to  earlier  forms  of  society  are 
frequently  to  be  found  in  it  but  in  a  crippled  state  or 
as  a  travesty  of  their  former  self,  as  e.  g.  communal 
property.  While  it  may  be  said,  therefore,  that  the 
categories  of  bourgeois  economy  contain  what  is  true  of 
all  other  forms  of  society,  the  statement  is  to  be  taken 
cum  grano  salis.  They  may  contain  these  in  a  de- 
veloped, or  crippled,  or  caricatured  form,  but  always  es- 
sentially different.  "jThe  so-called  historical  develop- 
ment amounts  in  the  last  analysis  to  this,  that  the  last 
form  considers  its  predecessors  as  stages  leading  up  to 
itself  and  perceives  them  always  one-sidedly^  since  it  is 
very  seldom  and  only  under  certain  conditions  that  it  is 
capable  of  self-criticism ;  of  course,  we  do  not  speak  here 
of  such  historical  periods  which  appear  to  their  own  con- 
temporaries as  periods  of  decay.  The  Christian  religion 
became  capable  to  assist  us  to  an  objective  view  of  past 
mythologies  as  soon  as  it  was  ready  for  self-criticism  to  a 
certain  extent,  dynamei  so-to-say.  In  the  same  way  bour- 
geois political  economy  first  came  to  understand  the 
feudal,  the  ancient,  and  the  oriental  societies  as  soon  as 
the  self-criticism  of  the  bourgeois  societyhad  commenced. 
So  far  as  bourgeois  political  economy  has  not  gone  into 
the  mythology  of  purely  (?)  identifying  the  bourgeois 
system  with  the  past,  its  criticism  of  the  feudal  system 
against  which  it  still  had  to  wage  war  resembled  Christ- 


—     302     — 

ian  criticism  of  the  heathen  religions  or  Protestant  criti- 
cism of  Catholicism. 

In  the  study  of  economic  categories,  as  in  the  case 
of  every  historical  and  social  science,  it  must  be  borne  in 
mind  that  as  in  reality  so  in  our  mind  the  subject,  in  this 
case  modern  bourgeois  society,  is  given  and  that  the 
categories  are  therefore  but  forms  of  expression,  mani- 
festations of  existence,  and  frequently  but  one-sided  as- 
pects of  this  subject,  this  definite  society;  and  that, 
therefore,  the  origin  of  [political  economy]  as  a  science 
does  not  by  any  means  date  from  the  time  to  which  it 
is  referred  as  such.  This  is  to  be  firmly  held  in  mind 
because  it  has  an  immediate  and  important  bearing  on 
the  matter  of  the  subdivisions  of  the  science. 

For  instance,  nothing  seems  more  natural  than  to 
start  with  rent,  with  landed  property,  since  it  is  bound 
up  with  land,  the  source  of  all  production  and  all  ex- 
istence, and  with  the  first  form  of  production  in  all 
more  or  less  settled  communities,  viz.  agriculture.  But 
nothing  would  be  more  erroneous.  Under  all  forms  of 
society  there  is  a  certain  industry  which  predominates 
over  all  the  rest  and  whose  condition  therefore  deter- 
mines the  rank  and  influence  of  all  the  rest. 

It  is  the  universal  light  with  which  all  the  other  colors 
are  tinged  and  are  modified  through  its  peculiarity.  It 
is  a  special  ether  which  determines  the  specific  gravity 
of  everything  that  appears  in  it. 

Let  us  take  for  example  pastoral  nations  (mere  hunt- 
ing and  fishing  tribes  are  not  as  yet  at  the  point  from 
which  real  development  commences).  They  engage  in  a 
I  certain  form  of  agriculture,  sporadically.    The  nature 


303 


of  lajid-ownership  is  determined  thereby.  It  is  held  in 
common  and  retains  this  form  more  or  less  according  to 
the  extent  to  which  these  nations  hold  on  to  traditions ; 
such  e.  g.  is  land-ownership  among  the  Slavs.  Among 
nations  whose  agricnltnre  is  carried  on  by  a  settled  popu- 
lation— ^the  settled  state  constituting  a  great  advance — 
where  agriculture  is  the  predominant  industry,  such  as 
in  ancient  and  feudal  societies,  even  the  manufacturing 
industry  and  its  organization,  as  well  as  the  forms  of 
property  which  pertain  to  it,  have  more  or  less  the  charac- 
teristic features  of  the  prevailing  system  of  land  owner- 
ship; [society]  is  then  either  entirely  dependent  upon 
agriculture,  as  in  the  case  of  ancient  Rome,  or,  as  in 
the  middle  ages,  it  imitates  in  its  city  relations  the  forms 
of  organization  prevailing  in  the  country.  Even  capital, 
with  the  exception  of  pure  money  capital,  has,  in  the 
form  of  the  traditional  working  tool,  the  characteristics 
of  land  ownership  in  the  Middle  Ages. 

The  reverse  is  true  of  bourgeois  society.  Agriculture 
cornea  to  be  more  and  more  merely  a  branch  of  industry 
and  ie  completely  dominated  by  capital.  The  same  is 
true  of  rent.  In  all  the  forms  of  society  in  which  land 
ownership  is  the  prevalent  form,  the  influence  of  the 
natural  element  is  the  predominant  one.  In  those  where 
capital  predominates  the  prevailing  element  is  the  one 
historically  created  by  society.  Rent  can  not  be  under- 
stood without  capital,  nor  can  capital,  without  rent  Ca|> 
ital  ii  the  aU  dominating  jeconomic  power  of  bourgeois 


Boci€^.     IT  must  form  the  starting  point  as  well  as  the 
en2n^d"15e  developed  before  land-ownership  is     After 


—     304     — 

each  has  been  considered  separately,  their  mutual  rela- 
tion must  be  analyzed. 

It  would  thus  be  impractical  and  wrong  to  arrange 
the  economic  categories  in  the  order  in  which  they  were 
the  determining  factors  in  the  course  of  history.  Their 
order  of  sequence  is  rather  determined  by  the  relation 
which  they  bear  to  one  another  in  modem  bourgeois  so- 
ciety, and  which  is  the  exact  opposite  of  what  seems  to  be 
their  natural  order  or  the  order  of  their  historical  de- 
velopment. What  we  are  interested  in  is  not  the  place 
which  economic  relations  occupy  in  the  historical  suc- 
cession of  different  forms  of  society.  Still  less  are  we 
interested  in  the  order  of  their  succession  "in  idea" 
(Proudhon),  which  is  but  a  hazy  ( ?)  conception  of  the 
course  of  history.  We  are  interested  in  their  organic 
connection  within  modern  bourgeois  society. 

The  sharp  line  of  demarkation  (abstract  precision) 
which  so  clearly  distinguished  the  trading  nations  of  an- 
tiquity, such  as  the  Phenicians  and  the  Carthagenians, 
was  due  to  that  very  predominance  of  agriculture.  Cap- 
ital as  trading  or  money  capital  appears  in  that  abstrac- 
tion, where  capital  does  not  constitute  as  yet  the  pre- 
dominating element  of  society.  The  Lombardians  and 
the  Jews  occupied  the  same  position  among  the  agricul- 
tural nations  of  the  middle  ages. 

As  a  further  illustration  of  the  fact  that  the  same 
category  plays  different  parts  at  different  stages  of  so- 
ciety, we  may  mention  the  following:  one  of  the  latest 
forms  of  bourgeois  society,  viz.  stock  companies,  appear 
also  at  its  beginning  in  the  form  of  the  great  chartered 
monopolistic  trading  companies. 


—    305     — 

The  conception  of  national  wealth  which  is  imper- 
ceptibly formed  in  the  minds  of  the  economists  of  the 
seventeenth  century,  and  which  partly  continues  to  be 
entertained  by  those  of  the  eighteenth  century,  is  that 
wealth  is  produced  solely  for  the  state,  but  that  the 
power  of  the  latter  is  proportional  to  that  wealth.  It  was 
as  yet  an  unconsciously  hypocritical  way  in  which  wealth 
announced  itself  and  its  own  production  as  the  aim  of 
modem  states  considering  the  latter  merely  as  a  means 
to  the  production  of  wealth. 

The  order  of  treatment  must  manifestly  be  as  follows : 
first,  the  general  abstract  definitions  which  are  more  or 
less  applicable  to  all  forms  of  society,  but  in  the  sense 
indicated  above.  Second,  the  categories  which  go  to  make 
up  the  inner  organization  of  bourgeois  society  and  con- 
stitute the  foundations  of  the  principal  classes ;  capital, 
wage-labor,  landed  property ;  their  mutual  relations ;  city 
and  country ;  the  three  great  social  classes,  the  exchange 
between  them;  circulation,  credit  (private).  Third, 
the  organization  of  bourgeois  society  in  the  form  of 
a  state,  considered  in  relation  to  itself;  the  ^^unproduc- 
tive"  classes ;  taxes ;  public  debts ;  public  credit ;  popula- 
tion; colonies;  emigration.  Fourth,  the  international 
organization  of  production;  international  division  of 
labor;  international  exchange;  import  and  export;  rate 
of  exchange.    Fifths  the  world  market  and  crises. 


—     306     — 

4.  PRODUCTION^  MEANS  OF  PRODUCTION,  AND  CONDITIONS 
OF  PRODUCTION.  THE  RELATIONS  OF  PRODUCTION 
AND  DISTRIBUTION.'  THE  CONNECTION  BETWEEN 
FORM  OF  STATE  AND  PROPERTY  ON  THE  ONE  HAND 
AND  RELATIONS  OF  PRODUCTION  AND  DISTRIBU- 
TION* ON  THE  OTHER.  LEGAL  RELATIONS.  FAM- 
ILY RELATIONS. 

Notes  on  the  points  to  be  mentioned  here  and  not  to  be 
omitted :' 

1.  War  attains  complete  development  before  peace; 
how  certain  economic  phenomena,  such  as  wage^labor, 
machinery,  etc.,  are  developed  at  an  earlier  date  through 
war  and  in  armies  than  within  bourgeois  society.  The 
connection  between  productive  force  and  the  means  of 
communication  is  made  especially  plain  in  the  case  of 
the  army. 

2.  The  relation  between  the  idealistic  and  realistic 
methods  of  writing  history ;  namely,  the  so-called  history 
of  civilization  which  is  all  a  history  of  religion  and  states. 

'Distribution  (Verkehr)  is  used  here  in  the  sense  of  physi- 
cal distribution  of  goods  and  not  in  sense  of  economic  dis- 
tribution of  the  shares  of  the  products  between  the  different 
factors  of  production.     Translator. 

*  As  the  "notes"  written  down  by  Marx  in  the  following  eight 
paragraphs  are  extremely  fragmentary,  making  translation  in 
some  cases  impossible  without  a  certain  degree  of  interpreta- 
tion, and  as  the  original  is  not  accessible  in  book-form,  they  are 
reproduced  here  in  German  for  the  benefit  of  the  student  who 
may  feel  interested  in  the  original  wording  as  it  had  been  jotted 
4«wn  by  Marx. 


—     307     — 

In  this  connection  sometning  may  be  said  of  the  differ- 
ent methods  hitherto  employed  in  writing  history.  The 
so-called  objective  [method].  The  subjective.  (The 
moral  and  others).     The  philosophic. 

4.  ^roinfrtmt,  ^robuftion^mtttcl  unb  ^robuftionSttet^Slt* 
ntffc.  ^VBhuUion^t)tvf)dUni^  jtnb  Scrfc^rSticrftaUntffe. 
<Btatii§'  nnb  ©gentl^umSfotmen  im  S^er^oItniS  au  hen 
^robttftt0tt§=  ttnb  SJcrfc^r^iJcr^artntffcn.  9le<^tSt>eirl^aintiffc. 
fjamilicnbcr^aitniffc. 

^oiahene  in  bcgug  auf  ^un!tc,  bie  l^icr  au  crtodl^ncn  unli 
ntc^t  bergcffen  tocrbcn  biirfcn: 

1.  S)€r  ^r  ic  g  tft  friil^er  au^gcbilbct,  hJtc  bcr  gricbcn: 
[Sluigufiil^rcn  tvaxe]  btc  ?(rt,  ttJtc  burc^  btn  ^ricg  unb  in 
ben  §lrmcen  2C.  gehjtffc  olonomif d^c  SSerl^dltniffc  icic  Sol^n* 
arbctt,  3?2a[d^ineric  ac.  friiT^er  enttvideli  [hjerbcn]  alg  im 
^nncren  ber  burgerlid^en  ©cfeUfc^aft.  Sludf;  ha§  ^Scrl^dltnt^ 
bon  ^robu!lib!raft  unb  SScr!cl^r§ber§aItntffen  trirb  bcfonbcr^ 
anfd^aitltd^  in  bcr  §lrmec. 

2.  9Ser!^aItni0  ber  bi^l^erigen  ibcalen  (Sefd^id^tgfd^rctbung 
gur  realen.  VlamtntXi^  bic  fogcnannte  ^Ihirgefc^td^tc,  bie 
alle  9^cItgion§*  unb  ©taatengefc^id^tc. 

S3ci  ber  ©elcgenl^eit  !ann  aud^  cttvaB  gcfogt  tocrbcn  iiber 
bie  berfd^icbenen  Slrten  bcr  biSl^ertgen  ©cfd^td^tsfd^rctbung. 
Sogenannte  objeftibc.  (Subicftibe.  (2)^oralifd^e  unb  onbcre.) 
^]^tIofop]^ifdf;e. 

3.  (&clunbarc§  unb  ^crtiarcS.  VUhtt^aupt 
abgclcitctc,  iibcrtragcnc,  nid^t  urfpriinglid^c 
^robuftionSbcrl^dltniffc.  ^ter  [ift  ha§]  Sinfpiclen  bcr 
tntcrnalionalen  9Serl^dItntf[c   [au  bel^anbcln]. 

4.  SSortoiirfe  iiber  2)?atertali§mu§  btcfcr  ^Tuffaffung. 
SScrl^aItni§  gum  naturali^ifd^en  3WotcriaIi»mu§. 

5.  SHfllcftif  bcr  93cgriffc  ^robu!tib!raft   (^robu!tion§^ 


—     308     — 

miitcl)  iinb  ^robuftion^DerljdltniS/ einc  SHaleffif.  bcrcn 
©rcnaen  au  Bcftimmcn  finb  unb  Me  realcn  Unteirfc^ieb  nic^t 
oufl^ebt. 

6.  S)ag  unegale  SSerl^dltnig  bcr  Sntiridlung  ber  mote^ 
riellen  ^robuftion  aum  93eifpiel  aur  funftlcrtfd^en.  Ueber^ 
l^aupt  ift  ber  93egriff  t>e§  gortfc^rittg  nidit  in  bcr  gehjo^n* 
Hd^en  ^bftraftion  au  faffen.  53ei  bcr  ^unft  ?c.  ift  btefe  ^v§* 
proportion  nod^  nirf)t  fo  toic^tig  unb  frf)miccig  au  faffen  ali^ 
innerl^alb  praftifcfi^oaialer  ^erf)altniffc  fetbft.  aum  93eifpiel 
t>Q§  Silbungguer^dltniiS  ber  5Sereinigten  Staaten  au  (Suropa 
2)er  eigentlid)  fc^ioierigc  ^unft,  ber  Ijier  au  erortern  ift 
ober  ber,  mie  bie  ^^robuftion^Dcv^altniffc  al^  9lecI)t^Derl)dlt' 
niffe  in  unglcid^e  (?)  (Jntluicflung  trcten.  ?lIfo  aum  ^ci- 
fpiel  ta^  93ert)dltni^  be«i  romifdtjen  ^riuatrec^tg  (im  ^rimi- 
nalrcc^t  unb  offentUdjen  ift  ha^  JDcniger  ber  Jafl)  iuv 
mobernen  ^robuftion. 

7  2)iefe  ^uffaffung  erf(^tnt  al^  not^meubtge  (Sntroicf- 
lung.  Slbcr  ^ered)tigung  be^  3ufnll^.  Varia.'  (^ie  Jrei* 
l)eit  unb  anbcreg  nod).)  (Ginmirfung  ber  S^ommunifation^^ 
mittel.)  28eltgefd)id)te  eigentlid)'  nid)t  immer  in  ber 
OJefdjic^te  aU  meltgefd)td)t[lic^eg]  g^efultat. 

8.  2)er  ?lu5ganggpunft  [ift]  nntiirlic^  Don  ber  "Slatixi- 
beftimmt^eit  [au  ne^men] ;  fubjcftiD  unb  obieftitJ,  ©tdmme. 
JHaffcn  2C. 

3.  Secondary  and  tertiary.  Conditions  of  production 
which  have  been  taken  over  or  transplanted ;  in  general, 
those  that  are  not  original.  Here  [is  to  be  treated]  the 
effect  of  international  relations. 

4.  Objections  to  the  materialistic  character  of  this 
view.     Its  relation  to  naturalistic  materialism. 


*  3in  Orioinot  ift  m  Icfrn*    Va 

*  3ni  Ohflinol  ift  tu  Ufra     fotl. 


—     309     — 

5.  The  dialectics  of  the  conceptions  productive 
force  (means  of  production)  and  relation  of  produc- 
tion, dialectics  whose  limits  are  to  be  determined 
and  which  does  not  do  away  with  the  concrete  dif- 
ference. 

6.  The  unequal  relation  between  the  development 
of  material  production  and  art,  for  instance.  In 
general,  the  conception  of  progress  is  not  to  be 
taken  in  the  sense  of  the  usual  abstraction.  In  the 
case  of  art,  etc.,  it  is  not  so  important  and  difficult 
to  understand  this  disproportion  as  in  that  of  practi- 
cal social  relations,  e.  g.  the  relation  between  edu- 
cation in  the  United  States  and  Europe.  The  really 
difficult  point,  however,  that  is  to  be  discussed  here 
is  that  of  the  unequal  ( ?)  development  of  relations 
of  production  as  legal  relations.  As,  e.  g.,  the  con- 
nection between  Roman  civil  law  (this  is  less  true 
of  criminal  and  public  law)  and  modern  production. 

7.  This  conception  of  development  appears  to 
imply  necessity.  On  the  other  hand,  justification  of 
accident.  Varia.  (Freedom  and  other  points).  (The 
effect  of  means  of  communication).  World  history 
does  not  always  appear  in  history  as  the  result  of 
world  history. 

8.  The  starting  point  [is  to  be  found]  in  certain 
facts  of  nature  embodied  subjectively  and  objective- 
ly in  clans,  races,  etc. 

It  is  well  known  that  certain  periods  of  highest 
development  of  art  stand  in  no  direct  connection 
with  the  general  development  of  society,  nor  with 


-\ 


—    310     — 

the  material  basis  and  the  skeleton  structure  of  its 
organization.  Witness  the  example  of  the  Greeks 
as  compared  with  the  modern  nations  or  even 
Shakespeare.  As  regards  certain  forms  of  art,  as 
e.  g.  the  epos,  it  is  admitted  that  they  can  never 
be  produced  in  the  world-epoch  making  form  as  soon 
as  art  as  such  comes  into  existence ;  in  other  words, 
that  in  the  domain  of  art  certain  important  forms  of 


it  are  possible  only  at  a  low  stage  of  its  develop- 
miefrt.  If  that  be  true  of  the  mutual  relations  of 
different  forms  of  art  within  the  domain  of  art 
itself,  it  is  far  less  surprising  that  the  same  is  true 
>f  the  relation  of  art  as  a  whole  to  the  general  de- 
velopment of  society.  The  difficulty  lies  only  in  the 
general  formulation  of  these  contradictions.  No 
sooner  are  they  specified  than  they  are  explained. 
Let  us  take  for  instance  the  relation  of  Greek  art 
and  of  that  of  Shakespeare^s  time  to  our  own.  It  is 
a  well  known  fact  that  Greek  mythology  was  not 
only  the  arsenal  of  Greek  art,  but  also  the  very 
ground  from  which  it  had  sprung.  Jsthe  view  of 
nature  and  of  social  relations  which  shaped  Greek 
imagination  and  Greek  [art]  possible  in  the  age  of 
automatic  machinery,  and  railways,  and  locomotives, 
and  electric  telegraphs?  Where  does  Vulcan  come 
in  as  against  Roberts  &  Co. ;  Jupiter,  as  against  the 
lightning  rod;  and  Hermes,  as  against  the  Credit 
Mobilier?  All  mythology  masters  and  dominates 
and  shapes  the  forces  of  nature  in  and  through  the 
imagination;    hence  it  disappears  as  soon  as  man 


—     311     — 

gains  mastery  over  the  forces  of  nature.    What  be- 
comes of  the  Goddess  Fame  side  by  side  with  Print- 
ing House  Square  ?*   Greek  art  presupposes  the  exis- 
tence of  Greek  mythology,  i.  e.  that  nature  and  even 
the  form  of  society  are  wrought  up  in  popular  fancy 
in   an  unconsciously  artistic  fashion.     That  is  its 
material.     Not,  however,  any  mythology  taken  at 
random,  nor  any  accidental  unconsciously  artistic 
elaboration  of  nature  (including  under  the  latter  all 
objects,  hence  [also]  society).    Egyptian  mythology 
could  never  be  the  soil  or  womb  which  would  give 
birth  to  Greek  art.    But  in  any  event  [there  had  to 
be]   a  mythology.     In  no  event   [could  Greek  art 
I  originate]  in  a  society  which  excludes  any  mytho- 
I   logical  explanation  of  nature,  any  mythological  at- 
1  titude  towards  it  and  which  requires  from  the  artist 
\  an  imagination  free  from  mythology. 
\     Looking  at  it  from  another  side :   is  Achilles  pos- 
sible side  by  side  with  powder  and  lead?    Or  is  the 
Iliad  at  all  compatible  with  the  printing  press  and 
steam  press  ?    Does  not  singing  and  reciting  and  the 
muses  necessarily  go  out  of  existence  with  the  ap- 
pearance of  the  printer's  bar,  and  do  not,  therefore, 
disappear  the  prerequisites  of  epic  poetry? 

But  the  difficulty  is  not  in  grasping  the  idea  that 
Greek  art  and  epos  are  bound  up  with  certain  forms 
of  social  development.  It  rather  lies  in  understand- 
ing why  they  still  constitute  with  us  a  source  of 
aesthetic   enjoyment  and   in   certain   respects   pre- 

»  The  site  of  the  'Times"  building  in  London.    K.  K. 


—    312    — 

vail  as  the  standard  and  model  beyond  attainment, 
A  man  can  not  become  a  child  again  unless  he 
becomes  childish.  But  does  he  not  enjoy  the  artless 
ways  of  the  child  and  must  he  not  strive  to  repro- 
duce its  truth  on  a  higher  plane  ?  Is  not  the  charac- 
ter of  every  epoch  revived  perfectly  true  to  nature 
in  child  nature?  Why  should  the  social  childhood 
of  mankind,  where  it  had  obtained  its  most  beauti- 
ful development,  not  exert  an  eternal  charm  as  an 
age  that  will  never  return?  There  are  ill-bred  chil- 
dren and  precocious  children.  Many  of  the  ancient 
nations  belong  to  the  latter  class.  The  Greeks  were 
normal  children.  The  charm  their  art  has  for  us 
does  not  conflict  with  the  primitive  character  of  the 
social  order  from  which  it  had  sprung.  It  is  rather 
the  product  of  the  latter,  and  is  rather  due  to  the  fact 
that  the  unripe  social  conditions  under  which  the 
art  arose  and  under  which  alone  it  could  appear 
can  never  return. 

(End  of  Manuscript.) 


—     313     — 
AUTHORS  QUOTED  IN  ZUR  KRITIK 


Arbuthnot,  258. 

Aristotle,    19,   41,   53,    78-70, 

153,  154,  184. 
Athenaeus,  87. 
Attwood,    100. 
Bailey,  84. 
Barbon,  95. 
Bastiat,  34. 
Berkeley,  Bischop,  32,  95-96. 

155. 
Bernier,  173. 
Blake,  133.  250. 
Blanc,  Louis,  231. 
Boisguillebert,    56,    59,     121, 

133,  166,  168,  198. 
Bosanquet,  124,  235,  242. 
Bray,  106. 
Brougham,  70. 
Buchanan,  147. 
Biisch,  231. 
Carli,  205. 

Castlereagh,  Lord,  100. 
Cato,   170. 
Chevalier,  154,  215. 
Clay,  258. 
Cobbet,  123. 
Cooper,  32. 
Corbet,  124. 


Darimont,  107. 

Dodd,    141. 

Forbonnais,  226. 

Franklin,  62-3,  155,  226. 

Fullarton,   260. 

Galiani,  30,  65,  85,  HI,  134. 

Garnier,  87,  141. 

Genovesi,  51,  164. 

Gladstone,  73. 

Gray,  103sq. 

Grim,  211. 

Hodgskin,  55. 

Horace,  178. 

Hume,     D.,     219,     22l8q,     231. 

Hume,  J.  D.,  249. 

Jakob,   141,   181. 

Jovellanos,  61. 

Julius,  231. 

Korner,  212. 

Law,  226,  231. 

List,  34. 

Locke,  91,  938q.,  199,  219,  226, 

233. 
Lowndes,  94. 
Luther,  174-5,  190. 
Mac  Culloch,  31,  57. 
Maclaren,  82,  231,  233. 
Macleod,  71,  193. 


—    314 


Malthus,  34. 

Mandeville,  Sir  J.,  154. 

Mill,  James,  123-4,  250  sqq. 

Misselden,  165,  171,  174-5. 

Montanari,  38. 

Montesquieu,  219,  227. 

Miiller,  85. 

Norman,  258. 

Opdyke,  124. 

Overstone,  Lord,  241,  258. 

Peel,  Sir  R.,  73,  100,  241,  258. 

Pereire,    120. 

Peter  Martyr,  210. 

Petty,  Sir  W.,  32,  56sq.,  165. 

172-3. 
Plato,   153. 
Pliny,   177. 

Proudhon,  61.  72,  103,  107. 
Rieardo,    56,    69sq.,   71,    217, 

231,   235.  250,   259. 


Say,  34,  71,  123,  153,  233. 

Senior,  178,  194. 

Sismondi,  56,  77. 

Smith,    34,    57,    61,    67-68,   80, 

231sq. 
Spenee,  123. 
Stein,  21,  31-2. 
Steuart,  Sir  James,  65sq.,  94sq.. 

222,  227sq.,  260. 
Storch,  152-3,  179. 
Thompson,  106. 
Tooke,  124,  247,  249,  260sq. 
Torrens,    58. 
Urquhart,  89. 
Ustariz,  61. 
Wilson,   260. 
Xenophon,  181,  184. 
Young,  231. 


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